What is UNCITRAL?

UNCITraL is the core legal body of the United Nations system in the field of international trade law. It stands for United Nations Commission on International Trade Law. It specializes in commercial law reform worldwide for over 50 years. UNCITRAL’s business is the modernization and harmonization of rules on international business.

What do you mean by UNCITRAL law? Actually, the word “law” at the end is redundant since the last letter of the acronym UNICTraL already stands for “law.” UNICTraL refers to the body under the UN system which specializes in reforming the law related to international commerce.

Who made UNCITraL Model Law?

The Model Law is a tool for harmonizing laws. Model Laws are a form of legislative text that is recommended to states for incorporation into their national law. Model Laws are not intended to interfere with the normal operation of the rules of private international law (¶136, MLES)

There are various UNCITral Model Laws. These are:

Model Laws vs. Conventional Laws

Notification. International Conventions require that the states that enact them should notify the United Nations and other states that may have also enacted them. However, unlike conventional laws, model laws do not require such notification. However, states are strongly encouraged to inform the UNCITraL Secretariat of any enactment of any model law within their province resulting from the work of UNICTraL.

Reservations. Model laws may be subject to modification or reservation when states incorporate them to their domestic legal system; however, in conventional laws, reservations and modifications are more restricted. In other words, model laws are more flexible.

MLEC (Model Law on Commerce)

The UNCITraL created the Model Law on Electronic Commerce (MLEC) which aims to facilitate commerce conducted using electronic means. It aims to provide internationally acceptable rules aimed at removing legal obstacles and increasing legal predictability for electronic commerce.

What is the purpose of the UNCITRAL Model Law on Electronic Commerce (MLEC)?

The MLEC’s purpose is to overcome obstacles arising from statutory provisions that may not be varied contractually by providing equal treatment to paper-based and electronic information. Such equal treatment is essential for enabling the use of paperless communication, thus fostering efficiency in international trade.

According to UN General Assembly (UNGA) Resolution number 51/62, the establishment of MLEC will contribute significantly to the development of harmonious international economic relations. The UNGA believes that MLEC will assist all states to enhance their legislation that will govern the use of alternatives to paper-based methods of communication and storage of information, and formulation of legislation.

What are the 3 principles of UNCITRAL?

UNCITraL’s MLEC was the first legislative text to adopt the following three fundamental principles: Non-discrimination, Technological neutrality, and Functional equivalence.

Non-discrimination (“Not anything less”)

The principle of non-discrimination ensures that a document would not be denied legal effect, validity or enforceability solely on the grounds that it is in electronic form. In other words, just because a document is online or on a computer, it doesn’t mean it’s any less real or important than paper documents.

Technological neutrality (“Timelessness”)

In light of the rapid technological advances, neutral rules aim at accommodating any future development without further legislative work. Rules are made to work with new tech stuff that comes out, without needing to change the rules every time something new is invented.

Functional equivalence (“Just as good”)

This means that the approach to the functions of electronic commerce is equivalent to the functions rendered by paper-based documents. Things you do online or with electronic documents are just as good and work the same way as if you did them on paper.

For example, among the functions served by a paper document are the following: to provide that a document would be legible by all; to provide that a document would remain unaltered over time; to allow for the reproduction of a document so that each party would hold a copy of the same data; to allow for the authentication of data using a signature; and to provide that a document would be in a form acceptable to public authorities and courts.

It should be noted that in respect of all of the above-mentioned functions of paper, electronic records can provide the same level of security as paper and, in most cases, a much higher degree of reliability and speed, especially concerning the identification of the source and content of data.

The adoption of the functional-equivalent approach should not result in imposing on users of electronic commerce more stringent standards of security (and the related costs) than in a paper-based environment. (page 20 and 21 of MLEC)

What are the 4 models under UNICTraL?

Please note that these are virtually not “models” of e-commerce but rather legal frameworks to facilitate electronic commerce.

UNCITRAL Model Law on Electronic Commerce (1996): This establishes rules for the equal treatment of electronic and paper-based information, as well as the legal recognition of electronic transactions and processes.
UNCITRAL Model Law on Electronic Signatures (2001): This provides additional rules on the use of electronic signatures.
United Nations Convention on the Use of Electronic Communications in International Contracts (New York, 2005): This offers the first treaty that provides legal certainty for electronic contracting in international trade.
UNCITRAL Model Law on Electronic Transferable Records (2017): This applies the same principles to enable and facilitate the use in electronic form of electronic documents and instruments, such as bills of lading, bills of exchange, cheques, promissory notes, and warehouse receipts.

In 2022, UNCITRAL also adopted the UNCITRAL Model Law on the Use and Cross-border Recognition of Identity Management and Trust Services, which provides the first globally-agreed uniform legal framework to identify physical and legal persons online.

What is the UNICTraL model law Article 7(1)?

This provides for the sufficiency of an electronic signature. It is sufficient if the following requirements are met:

Method that identifies. There is a method used to identify the person signing and to indicate his approval of the information contained in the data message;
Reliable method. That method is reliable and appropriate in relation to the purpose of data that was communicated or generated.

What is the UNCITRAL Model Law in the Philippines?

In the Philippines, the UNCITRAL Model Law has been adopted to govern both domestic and international commercial arbitration1. This adoption complements the Philippines’ earlier accession to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

The Alternative Dispute Resolution Act of 2004 (Republic Act No. 9285) institutionalized the use of an alternative dispute resolution system in the Philippines. This Act introduced the concept of international commercial arbitration and adopted the UNCITRAL Model Law as the law governing international commercial arbitration in the Philippines3. This has brought Philippine law on international commercial arbitration up to par with the world’s best and it superseded the outmoded 1952 RA 876, the Philippine Arbitration Law.

The Act encourages and actively promotes the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial justice and declog court dockets2. It provides means for the use of ADR as an efficient tool and an alternative procedure for the resolution of appropriate cases.

What are the advantages of UNCITraL model law and its benefits to E-Commerce?

Modernization and Reform: The Model Law is designed to assist States in reforming and modernizing their laws on arbitral procedure to take into account the particular features and needs of international commercial arbitration.
Comprehensive Coverage: It covers all stages of the arbitral process from the arbitration agreement, the composition and jurisdiction of the arbitral tribunal, and the extent of court intervention through to the recognition and enforcement of the arbitral award1.
Global Consensus: The Model Law reflects worldwide consensus on key aspects of international arbitration practice, having been accepted by States of all regions and the different legal or economic systems of the world1.
Flexibility: The Model Law is a flexible device that can be adapted to the specific needs of each country.
Harmonization: The Model Law promotes the harmonization of national laws, satisfying the needs of arbitrating parties and enhancing international commercial arbitration2.
Predictability and Consistency: The Model Law provides a comprehensive framework that countries can adopt to ensure consistency and predictability in their legal systems3.
Promotion of International Trade and Investment: By incorporating best practices and internationally recognized principles, the Model Law aims to create a favorable environment for international trade and investment3.

MLES (Model Law on Electronic Signatures)

MLES wants to make it easier for people to use electronic signatures, which are like digital versions of your handwritten signature. It sets rules to make sure that electronic signatures are just as good and trustworthy as traditional (handwritten) signatures. This way, MLES helps countries create laws that treat electronic signatures fairly and make sure everyone knows they are reliable.

Why is a model law on electronic signatures important?

People are using electronic signatures more and more instead of writing their signatures by hand. Because of this, there’s a need for new rules to make sure everyone agrees on how these electronic signatures should work. Different countries might make different rules, which could be confusing. So, there’s a suggestion to have one set of rules for all countries to follow.

This would help everyone understand electronic signatures better and make sure they work well together around the world. To help with this, the MLES created guidelines based on a fundamental rule from the UNCITRAL Model Law on Electronic Commerce.

The Model Law is a tool for harmonizing laws

The fundamental rule behind the MLES is all about making sure electronic signatures can do their job just like traditional signatures, but without forcing people to use one specific type of technology. This means the laws that follow these guidelines can accept many different kinds of electronic signatures, whether they use special computer security methods like cryptography (which is a fancy way of locking and unlocking information so only certain people can see it) or other kinds of electronic methods.

What is the function of a signature?

To identify a person; to provide certainty as to the personal involvement of that person in the act of signing; and to associate that person with the content of a document. A signature might attest to the intent of a party to be bound by the content of a signed contract.

What is the principle behind the model law on electronic signatures?

Based on the preambular text, UN General Assembly (UNGA) aims to promote reliance on electronic signatures (e-signatures) for producing legal effect where they are functionally equivalent to handwritten signatures.

The UNGA is convinced that harmonious rules will establish practical reliability and commercial adequacy of electronic techniques. It is convinced that a model legislation will harmonize international economic relations.

What is an electronic signature?

It means data in electronic form which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message. In other words, it is a form of electronic data with two main purposes:

Identify the signature; and
Indicate the signatory’s approval of the data message.

Source: Article 2 of MLES

What are the parties when an electronic signature is used?

Signatory – the person who uses signature-creation methods to certify the integrity and authenticity of the information it is attached to;
Relying party – persons who rely on or provide services by virtue of the e-signature;
Certification service provider – provides services to support an electronic signature that may be used for legal effect as a signature.

When can an electronic signature be considered reliable?

When the data on the creation of the e-signature is linked to the signatory and no other person;
The data on the creation of the e-signature is under the control of the signatory only;
Any alteration to e-signature after the time of signing is detectable;
If the purpose of the e-signature is to provide integrity to the information it is related, any alternation to the information after the signing must be detectable.
However, these rules do not limit a person’s ability to establish the reliability of the e-signature, or adduce evidence to the non-reliability of the e-signature.

Source: Article 7 of MLES

What are the necessary conducts to ensure the reliability of an e-signature?

The signatory must exercise reasonable care to avoid unauthorized use of its signature creation data, otherwise, he bears the legal consequence for failure to observe this conduct;
If the signatory knows that the signature creation data has been compromised, he must notify the person who relied on the e-signature without delay.
The e-signature certification provider must:
1. exercise reasonable care to ensure the accuracy and completeness of all the material representations relevant to the certificate throughout its lifecycle;
2. enable the relying party to ascertain the identity of the certification service provide from the certificate, to determine that the signatory has control over the signature creation data, and that the signature data is valid on or before the certification was issued.
3. Enable a relying party to determine from the certificate the identity of the signatory, the validity of the signature data and its limitations.
4. Must ensure the trustworthiness of its resources, assets, computer systems, information, audit, accreditations, and other relevant factors.
The relying party is responsible for:
1. taking reasonable steps to verify the reliability of the e-signature and shall bear the legal consequences for his failure to do so;
2. To verify the validity and limitations of the certification if available.

What are techniques to ensure the reliability of e-signatures?

Cryptography – the branch of applied mathematics that concerns itself with transforming messages into seemingly unintelligible form and back to its original form. It uses a “public-key cryptography” to generate two sets of related “keys” – one key transforms the data to an unintelligible form, the other key returns the message to its original form.
Public and private keys – private key is used to create a digital signature; public key is used to verify the digital signature.
Hash function – creates a digital representation, or compressed form of the message, often referred to as a “message digest”, or “fingerprint” of the message, in the form of a “hash value” or “hash result” of a standard length that is usually much smaller than the message but nevertheless substantially unique to it.
Digital signature – the signatory first delimits precisely the borders of what is to be signed. Then a hash function in the signatory’s software computes a hash result unique.
Certification service provider – To assure the authenticity of the certificate with respect to both its contents and its source, the certification service provider digitally signs it. The issuing certification service provider’s digital signature on the certificate can be verified by using the public key of the certification service provider listed in another certificate by another certification service provider (which may but need not be on a higher level in a hierarchy), and that other certificate can in turn be authenticated by the public key listed in yet another certificate, and so on, until the person relying on the digital signature is adequately assured of its genuineness.

UNCITRAL Model Law on E-Commerce and E-Signatures