Tianmi Stilphen, ICC DSI
As the world becomes increasingly digital, the need for efficient and secure cross-border trade has never been more pressing. A globally accepted legal framework for the use of electronic documents in cross-border trade is the cornerstone of achieving true end-to-end connectivity. 2023 will be a tipping point—it marks the point where nations that were previously in the “watching zone” formally declare their move to advance digitalization and where the industry begins to converge around a harmonized set of practices accordingly. The UNCITRAL developed the MLETR in 2017 to provide a legal basis for using electronic transferable records domestically and internationally. Despite its proven benefits, broader adoption of the MLETR has been slow. However, since Abu Dhabi Global Market’s enactment of The Electronic Transactions Regulations in 2020, the MLETR has gained global momentum, setting off a chain reaction of legal reforms worldwide. This article will identify replicable factors that can accelerate the movement toward broader adoption of the MLETR, followed by an overview of the legal reform efforts made since 2021 in aligning with the MLETR. With three of the G7 member states joining forces in 2023, the signal of MLETR alignment is clear to the rest of the world.
Three Catalysts
Global Collaboration/Transparency:is essential in facilitating the legal reform process towards paperless trade. Countries that have already undergone MLETR alignment have valuable experiences and lessons that can be shared with other jurisdictions wishing to undertake similar reforms. To help stakeholders stay informed about the progress of MLETR adoption worldwide, ICC DSI has developed an MLETR Tracker. This tool aims to provide up-to-date information on each country’s progress towards MLETR alignment and the various approaches taken by different countries. With expert advisory from UNCITRAL and feedback from various countries, the Tracker promotes global collaboration and transparency toward achieving a harmonized legal framework that facilitates paperless trade.
Concurrent with legal alignment efforts, the ICC Digital Standards Initiative has been working with various industry stakeholders and standards-setting bodies to identify key data elements used across 7 key trade documents which account for the bulk of paperwork across the typical supply chain – certificates of origin, commercial invoices, warehouse receipts, packing lists, bills of lading, customs declaration forms and insurance certificates. This initial core dataset, coupled with a technology vision to enable Trust in Trade, was recently launched1 at the ICC Future Trade Forum to facilitate interoperability and seamless data sharing across digital applications.
Capacity-building: is a critical factor that can significantly impact legal reform efforts. Countries with stable political systems and strong economies may be better able to implement legal reforms quickly and efficiently by leveraging the maturity of the legal system. On the contrary, low to middle-income countries may lack the necessary resources and expertise to develop and implement such frameworks, and they may have different legal traditions and regulatory systems than developed countries. Therefore, capacity-building programs are crucial in providing the necessary knowledge and skills to help these countries align with international legal standards. For instance, ICC Digital Standards Initiative in collaboration Asian Development Bank and UNCITRAL, recently returned from a capacity-building project in Tbilisi, Georgia. The program bridged the knowledge and conceptual gaps by providing a structural understanding of MLETR and showcasing Singapore and Germany’s alignment journeys. Georgia’s unique position along the Silk Road and cultural richness have reconsolidated the importance of understanding each country’s distinctive needs and legal structure when assisting with legal reform on digital trade. It’s essential to work closely with local stakeholders to ensure that any proposed changes are appropriately woven into its unique social fabric to foster optimized harmonization.
Public and Private Collaboration: The transition to paperless trade is not complete without the active involvement of the private sector. In Japan, for example, the government considers private sector acceptance as a prerequisite for legal reform. The recent Georgian capacity-building program was able to mobilize the Revenue Services, Ministry of Economy, and Business Association effectively. Private sector stakeholders, such as businesses and industry associations, can provide valuable insights and expertise on the practical implications of legal reform in their day-to-day operations. By collaborating with the public sector, they can help ensure that legal frameworks are practical, effective, and relevant to the needs of the industry. The private sector’s involvement is vital to ensure that the legal framework does not hinder innovation and progress but instead supports it.
Paperless Legal Reform Snapshot
Currently, seven countries have aligned with the MLETR framework: ABGM, Bahrain, Belize, Kiribati, Papua New Guinea, Paraguay, and Singapore. The 2021 G7 Digital and Technology Ministerial Declaration has mobilized the US, UK, Germany, and France to enter the last mile of legal reform, with plans to complete their alignment with MLETR by the end of 2023. There has also been expansive global reach from both high-value and high-volume economies, including China, Zambia, Argentina, and Australia, among others, to consider MLETR alignment through public and private stakeholder consultations. The MLETR offers a uniform and neutral text that governments can choose to incorporate into their statutory law largely in the form prepared by UNCITRAL (ie. ADGM and Belize). While a globally harmonized legal framework is crucial in ensuring the efficient use of electronic transferable records across international borders, countries’ legal sovereignty and political reality ought to be respected. Against the backdrop of various existing legal systems, governments may alternatively choose to enact the main principles of the MLETR as necessary to ensure that electronic transferable records are treated the same as paper-based transferable documents and instruments (ie. The US and Germany).
The proliferation of various commitments to 100% paperless trade appearing in bilateral or multilateral agreements is also a strong driver for MLETR momentum. For instance, the UN ESCAP Framework Agreement in Cross-border Paperless trade (CPTA) aims to accelerate the implementation of digital trade facilitation measures. Other agreements such as DEPA, and DEA could complete their framework with an MLETR plug-in. Other Diagnostic tools and studies such as UNCTAD eTrade Ready can also identify a case for MLETR adoption.2
The world is moving towards digitalization at an accelerated pace, and no economy can afford to be left behind. Let us embrace this tipping point and work together towards a harmonized set of practices by aligning to the MLETR framework. The time for action is now, and the MLETR is the way forward.
References
1 Download the reports “Digital Trade Standards” and “DSI Trusted Technologies Principles” from https://www.dsi.iccwbo.org/
2 UNCITRAL Model Law on Electronic Transferable Records (MLETR) Introductory Paper
