Electronic Transferable Records – Canada Steps Up

The new federal omnibus bill on the economy – Bill C-39, the Building Canada Strong Act – contains in Part 2 (“Keep Canada Moving”) Division 8, the Enabling Digital Trade Act.

This text implements for international trade in Canada the UNCITRAL Model Law on Electronic Transferable Records (MLETR). It allows, though does not require, the use of electronic versions of transferable records. Transferable records transfer title to the goods or sums mentioned in them by the transfer of the records themselves. Bills of lading are a common example, promissory notes another.

The provisions are a pretty straighforward reproduction of MLETR. They are consistent with the recently adopted Commonwealth Model Law on Digital Trade. Slaw had a note on the Commonwealth Model Law here.

Essentially, MLETR (and the federal bill in Canada) allow parties to international transactions to use electronic transferable records (ETRs) if the electronic versions are “reliable” in several ways.

The ETR must satisfy these rules (found in s. 8(1) of the new statute):

(b) it can be identified, by means of a reliable method, as being distinguishable from any copies of it;

(c) it is capable of being controlled, by means of a reliable method, from the time that it is created until the time that it ceases to have any effect or validity;

(d) it is protected, by means of a reliable method, against unauthorized alteration;

Further, “[a] paper trade document may be replaced by an electronic record if a reliable method is used for the change of medium.” (s. 8(2))

There are in MLETR seven different elements that must be reliable for the records to be legally effective.

The key question for those wanting to use ETRs is “what is reliable?” This question does not have a simple answer. UNCITRAL’s Guide to Enactment of MLETR, found at the same link (above) as the Model Law, says that the standard of reliability for each element of the ETR may be different, depending on the circumstance and the user’s needs and practices.

To assist the evaluation, the International Chamber of Commerce (ICC) and the Digital Governance Council (of Canada) have developed reliability assessment tools. The ICC’s own announcement is here.

MLETR has become since its adoption in 2017 the global standard for digital trade. The federal government can apply it only to cross-border trade, or other areas in federal legislation. Its application to commerce within provinces will presumably await satisfactory experience with the federal law.

Whether smaller businesses will be able to evaluate the reliability of the several elements of ETRs remains to be seen. In due course practices will develop and professional advisors (lawyers, insurers, technology consultants) will be able to give guidance to keep things safe.

The bill is a good first step in bringing Canada into this element of digital trade.

[Slaw has discussed ETRs in the past, most recently when UNCITRAL adopted MLETR. Previous articles were mentioned in this summary.]