The Situation: On 1 February 2021, Parliament passed the Electronic Transactions (Amendment) Bill (Bill No. 1/2021) (“Bill”).
The Bill enables the creation and use of electronic transferable records (“ETRs”) and expands the scope of electronic instruments afforded legal recognition under the Electronic Transactions Act (Chapter 88) (“ETA”) to various trade documents including negotiable instruments, bills of exchange, promissory notes, bills of ladings and other transferable documents (“Transferable Instruments”).
The Bill introduces a new category of documents in respect of which electronic records and signatures will be legally recognised for the purposes of Singapore law once the amendments become effective.
Under the existing regime set forth in the ETA, Transferable Instruments are excluded from the provisions relating to the legal recognition of electronic records, signatures and contracts. Other categories of documents that are also excluded include conveyances and contracts for sale of immovable property, declarations of trusts, and the creation of wills. For these excluded categories, physical (hard copy) documents are required.
The Bill adopts with some modifications the UNCITRAL Model Law on ETRs adopted by the United Nations Commission on International Trade Law on 13 July 2017 (“Model Law”) and provides for a new regime to be included in the ETA that will apply to Transferable Instruments, allowing for the use of electronic and digital versions of Transferable Instruments and reducing the reliance on and necessity of physical hard copies. Singapore is amongst the first major trading hubs to adopt the Model Law (with modifications).
This new regime is not intended to affect any other laws that may govern Transferable Instruments, except as expressly provided. It remains open for parties to choose to refuse to consent to the use of (in whole, but not in part) ETRs in relation to a Transferable Instrument. It is also possible for parties to change from an ETR back to a physical instrument if they desire.
Three Key Takeaways
- The amendments to the ETA will have a wide-ranging effect on all parties dealing with Transferable Instruments, particularly in the maritime and international trade and financial sectors, including potential cost savings and faster turnaround times.
- By adopting the international standards in the Model Law, the Singapore Government ensures that the use of ETRs in Singapore will be compatible and harmonised with international standards and able to be used seamlessly in cross-border transactions.
- Companies should review their business processes and IT, digital infrastructure and systems to assess how they can unlock the full potential of the digital solutions available to enjoy the benefit of the amendments to the ETA. Companies may also wish to consider the potential providers from whom they may procure the most suitable management systems to manage, store, process, issue, transfer, present and control their ETRs.
Source: Jones Day article