Prof Ishita Das

International trade has played a significant role in uplifting the economic profiles of several countries over the past decades. However, the interface of trade and sustainability has always been a hotly debated issue in trade circles. The core challenges relating to sustainability still need to be addressed effectively. Further, with the rise of e-commerce, the concerns relating to sustainability have become all the more prominent and pressing. This piece examines the international regulatory frameworks that deal with e-commerce, including the UNCITRAL Model Law on Electronic Transferable Records. It highlights how the use of innovation in technology can be extremely useful in navigating the challenges associated with sustainability. The piece finally considers the relevant domestic legal framework and argues how greater certainty on the legal status of e-bills of lading could help achieve sustainability.

Introduction

The World Trade Organisation (“WTO”) has played an instrumental role in ensuring that fair trading rules guide the conduct of the various states engaging in international trade. The crown jewel of the WTO, the Dispute Settlement Body (“DSB”), has considered hundreds of cases, and a remarkable number involve the interface of trade and sustainability. A study of the WTO environment-related trade disputes reveals the adoption of a relatively high threshold that the respondent states have to match to justify the use of measures to protect their environment or public health.

Further, technological innovation and the rise of electronic commerce or e-commerce have dramatically transformed the trading landscape. It is interesting to note that as per a 2022 UNCTAD report, the global value of e-commerce, including domestic and international transactions, was 26.7 trillion USD in 2019. In 2020, around one in four online consumers engaged in cross-border transactions. It is estimated that by 2030, the value of e-commerce will skyrocket, with India’s contribution being around 350 billion USD in comparison to its current figure of 45-60 billion USD. As envisioned under the 2030 Agenda for Sustainable Development, the contributions of developing countries to world trade are touted to increase tremendously. Therefore, digital trade or e-commerce would be one of the primary drivers of global economic growth.

However, unless the drawbacks of e-commerce or digital transactions are addressed, the benefits of digital commerce would continue to garner positive results for only some countries, and the least-developed countries (“LDCs”) would continue to be excluded. The developed nations and some rapidly emerging developing economies have the means to develop advanced digital infrastructures which can, in turn, allow them to shift to digital transactions for most activities including international commerce. However, as the LDCs are grappling with greater digital exclusion in comparison to the other countries, the true benefits of digitalisation such as e-commerce may elude realisation. An essential step in this regard concerns investing in building adequate digital infrastructure to support the enormous volume of electronic transactions in the near future. Further, education and awareness about information and communication technology across all levels is vital to ensuring that the true power of the digital space is harnessed effectively.

It is also worth noting that as a very high share of international trade would depend on e-commerce, it is critical to ensure that the high carbon emissions associated with the delivery of goods are minimised. An effective manner of reducing paper-based documentation used in international trade, specifically e-commerce, is to promote greater reliance on electronic documentation. Blockchain-based transactions have also gained popularity, and the distributed ledger system can be highly beneficial to the international trading community. The UNCITRAL Model Law on Electronic Transferable Records (“MLETR”) can cover blockchain-based transactions and, in turn, contribute to the adoption of more sustainable alternatives across the global e-commerce supply chains. Therefore, the focus of this paper would be on the MLETR and how this international instrument could be beneficial for India. The following section of the piece explores the role of the WTO, highlights the significance of the MLETR, and discusses the Information Technology Act 2000 (“IT Act”).

Technology, Sustainability, and E-Commerce

Technological innovation can make our lives easier and more convenient. It can also create opportunities for a more sustainable future. As e-commerce currently constitutes an important component of international trade, technologies such as blockchain are one of the key solutions that would help address the myriad challenges faced by the members of the international community.

The Role of the WTO

The WTO has also undertaken several meaningful steps to adapt to the changing global scenario as regards digital transactions and electronic commerce. The Work Programme on E-Commerce was established in 1998 following the Declaration on Global E-Commerce adopted at the WTO’s Second Ministerial Conference. Regular discussions have been held under the aegis of the Work Programme since its inception, covering various issues concerning e-commerce. A group of 88 WTO members have also initiated separate discussions under the Joint Initiative on E-Commerce, focusing on the trade-related aspects of e-commerce.

The WTO members are taking significant strides towards creating appropriate legal norms pertaining to e-commerce, such as the proposal of Digital Economy Agreements in the recently convened Work Program on 22 March 2023. While presenting the proposal, Singapore emphasised the need to build adequate regulatory frameworks to support digital trade, including electronic transactions and invoicing. The UK also introduced its forthcoming paper on trade digitalisation and how to incorporate the principles of transparency, inclusivity, and efficiency in legal norms. Several members also highlighted the role of the WTO regarding capacity-building and technical assistance vis-à-vis those countries that may require such assistance.

The UNCITRAL Model Law on Electronic Transferable Records

Apart from the WTO’s several initiatives, certain international instruments, such as the UNCITRAL Model Law on E-Commerce and Electronic Signatures, give legal certainty to electronic communications in international commercial transactions. For example, Article 9 of the UNCITRAL Model Law on E-Commerce emphasises the admissibility and evidentiary value of data or electronic messages. All these instruments are key to recognising the validity of blockchain-based transactions. The MLETR adopted in 2017 is a recent attempt to address the gaps arising from the rapidly increasing divide between legal frameworks and technological innovation.

This Model Law lends legal certainty to ‘smart contracts’ and could greatly benefit businesses in the transportation, logistics, and finance sectors. As it focuses on paperless transactions, it would automatically lead to more sustainability across global supply chains. As this is wide enough to cover all categories of technologies, such as distributed ledgers, it would also help regulate blockchain-based transactions. As of 2023, the MLETR has been adopted in 7 countries, including Singapore, the UAE, Bahrain, Belize, Kiribati, Papua New Guinea, and Paraguay. This can be viewed as a positive development, and with time more countries should adopt domestic laws influenced by the Model Law.

For example, the MLETR was adopted in Singapore through a 2021 amendment to the Electronic Transactions Act 2010 (“ETA”). This amendment introduced new definitions comprising ‘electronic transferable record,’ ‘electronic transferable records management system’, and ‘transferable document or instrument’. The newly inserted Section 16E accords legal recognition to electronic transactions. Part 2A deals with various provisions relating to the incorporation of the MLETR, including the equivalent treatment that must be provided to electronic bills of lading, bills of exchange, and promissory notes, among others. As per the relevant provisions of the Act, both foreign and domestic bills of lading, as long as they are valid, would be covered within its scope.

The Information Technology Act, 2000

The bills of lading form the backbone of trade transactions across the world, and therefore, with the enhanced dependence on e-bills of lading, time-efficiency, cost-savings, and overall efficacy can be achieved. Similarly, India can adopt the UNCITRAL Model Law on Electronic Transferable Records by making appropriate amendments to the IT Act. While the IT Act recognises the UNCITRAL Model Law on E-Commerce and has provisions that recognise electronic transactions affording them an equivalent treatment, specific provisions such as recognition of electronic trade documents, including the e-bills of lading and e-way bills, would be extremely useful for the Indian trading community.

The Supreme Court in Trimex International FZE Limited, Dubai vs. Vedanta Aluminium Limited, India, reported in 2010 3 SCC 1, recognised the arbitration clause contained in an electronic contract. However, it is pertinent to note that while the Indian courts have considered claims based on paper-based bills of lading, there is still no precedent as regards the specific recognition of e-bills of lading. While general electronic transactions are covered within the scope of the IT Act and could extend to e-bills of lading, provided they match the necessary requirements under the Indian Evidence Act 1972, several unique aspects associated with bills of lading remain unaddressed. For example, while the Indian courts may still recognise the existence and contents of the e-bills of lading, other important elements, such as its negotiability and capacity to pass on the title to the holder in due course, could be shrouded in uncertainty due to lack of specific recognition of e-bills of lading.

For instance, a 2022 amendment introduced to the IT Act allows certain documents, such as promissory notes, bills of exchange, and even mortgage documents, to be executed, stored, and presented as evidence electronically as per the criteria specified under the Indian Evidence Act. According to the earlier regime, no recognition was afforded to electronic promissory notes and bills of exchange. The Negotiable Instruments Act 1881 only provided legal legitimacy to electronic cheques. However, with the recent changes in the IT Act, it is now possible to lend legal credibility to e-promissory notes and e-bills of exchange. Similarly, specific recognition of the e-bills of lading, as reflected in Singapore’s ETA, would render such documents legally valid unambiguously. It is interesting to note that the Indian government and the relevant industry stakeholders are already warming up to the idea of blockchain-based transactions, for example, by creating the Indian Banks’ Blockchain Infrastructure Company Private Limited (“IBBIC”).

The IBBIC comprises, such as State Bank of India, ICICI Bank, HDFC Bank, Indian Bank, and Axis Bank, among several others, and it intends to streamline the processing of letters of credit, e-way bills, and GST invoices. Further, the Central Board of Indirect Taxes and Customs has launched a pilot electronic cargo tracking system harnessing blockchain technology to track the containers to the warehouse at ICD Tughlakabad Import Commissionerate under Delhi Customs. This initiative has been launched with the intent to assess whether this technology can secure documentation involved in the process along with the use of GPS to track the containers. Therefore, given such developments, the relevant changes in the IT Act can provide the necessary regulatory support to ensure that the Indian trading community’s interests are protected when they engage in such digital transactions.

Conclusion

The use of AI and blockchain can revolutionise international trade as it would reduce the multiple transactions required for one set of obligations. However, with the use of blockchain, the processing time would be drastically reduced, and the number of transactions involved in the entire process would be much lesser. Various aspects, such as trade finance, border protocols, and transportation, could be more robust with the use of this technology. However, despite the potential benefits of AI and blockchain for sustainability, there are challenges to adoption that must be addressed. Therefore, this space, while having the benefits of decentralisation, needs the requisite legal backing to adopt such transactions in mainstream trade and e-commerce practices. The specific amendments to the IT Act, based on the UNCITRAL Model Law on Electronic Transferable Records, could promote faith among businesses to proceed with digital transactions without worrying about their validity. As more and more countries amend or create new laws recognising the use of blockchain-based transactions, the traditional notions of trading and the high reliance placed on paper-based mechanisms will become obsolete in the near future. It is truly up to the nations to determine their interactions with the SDGs and how they wish to adapt to the idea of long-term sustainability in trade and commerce. Technology should be harnessed for the welfare of all members of the international community, and we are currently on the brink of limitless opportunities to make the world a better place to live in.

The author is an Assistant Professor of Law at NALSAR University of Law, Hyderabad.

Sunidhi Das, an undergraduate student at the National Law School of India University, Bengaluru, provided research assistance for this piece.