Transnational law as an enabler of digital trade

Abstract

History records that trade and trade finance, vital to economic advancement and prosperity, have benefited profoundly from technological evolution and accompanying supportive transnational law. Today, the blossoming of technology, most notably digitalization, has the potential to greatly facilitate both domestic and international trade and, just as importantly, to assist in fulfilling the environmental and social goals critical to meet the UN Sustainable Development Goals and the Paris Agreement. However, obstacles to digital trade arise from the existing legal and regulatory frameworks. Accordingly, legal reforms are overdue. Impetus is now needed to create a fully supportive transnational legal environment. There are several examples of where the technology exists, but the law frustrates its effective deployment. The laws of most jurisdictions require certain trade documents (like bills of lading, payment, and title instruments) to be recorded in a tangible form (paper). The International Chamber of Commerce (ICC) estimates that digitalizing trade documents could reduce transaction costs by 80 per cent and eliminate billions of paper documents in the trade system. A limited number of jurisdictions have reformed their laws to address this gap and innovative private sector actors have taken the initiative to benefit from these reforms. An example includes the development of the Distributed Ledger Payment Commitment by BAFT that relies on narrow but effective changes in Delaware law governing promissory notes; others chose to be governed by Singapore law, which recently amended to align with the Model Law on Electronic Transferable Records (MLETR). Law can be an enabler of digital trade. To this end, work has begun, including by the ICC and the International Institute for the Unification of Private Law. But the reform needs to be accelerated. This article considers the benefits of digital trade, key legal obstacles, and how transnational law can enable innovation and digitalization not only of the vast volumes of paper but of the entire trade and trade finance processes.