law, would allow mitigation of cross border legal risks, such as fraud, insolvency,
exporter’s lien, and lack of a systematic credit filing system.
In a transferable instrument-based programme, the exporter of cars submits
invoices which the buyer in China approves. Also, the exporter creates a draft or
bill of exchange or negotiable promissory note or another form of negotiable
instrument, governed under Chinese law. Once created, the instrument is then sold
by the exporter to a Chinese investor through physical embodiment of the negotiable
instrument. Since the instruments are governed under Chinese law and owned by a
Chinese investor, they are free of most foreign law constraints. In this arrangement,
the Bank of China office in Frankfurt which participated in the pilot from Europe
with CLFS or CLFS itself could become the investor. The investor takes physical
possession of the instrument upon purchase, then presents the instrument to the car
importer for payment on the invoice maturity date. It may so happen that the
creation, acceptance, assignment and presentation of the instrument are all handled
by the investor. In that case the European exporter and Chinese importer do not need
to exchange any physical documents. If all the above are to happen in an electronic
platform then modern e-commerce laws that support use of negotiable documents in
electronic form through use of electronic transferable records must be adopted in
China to facilitate such transaction.
6 Rules for Supporting Better Information Exchange
and Facilitating Access to Finance
In 2017, the United Nations Commission on International Trade Law (UNCITRAL)
adopted the Model Law on Electronic Transferable Records (MLETR)
56 which can
be used as a specimen text by national lawmakers when preparing domestic law on
electronic transferable records.
57 UNCITRAL undertook the task of creating harmonized rules for electronic transferable records in 2011, to benefit the promotion of
electronic communications in international trade. Prior to that certain jurisdictions
had already promulgated national laws on the subject with different approach and
content to remove the obstacle of transferring the physical paper in original.
58
However, most of these national laws are technology specific and/or allow use of
electronic records that are not functionally equivalent to the paper form. In addition,
most of these laws deal with only one type of instrument/document in separate
56 http://www.uncitral.org/pdf/english/texts/electcom/MLETR_ebook.pdf.
57 The term “electronic transferable record” is used in this paper as an electronic equivalent of a
transferable instrument (negotiable or non-negotiable) or a document of title.
58 For example, the Korea Trade Net (KTNET), which was designated as the registry operator for the
purposes of the South Korean Presidential Decree on the Implementation of the Electronic Bill of
Lading Provisions of the Commercial Act of 2008, achieves exclusive control through this title
registry.
54
A. Basu Bal and T. Rajput
exporter’s lien, and lack of a systematic credit filing system.
In a transferable instrument-based programme, the exporter of cars submits
invoices which the buyer in China approves. Also, the exporter creates a draft or
bill of exchange or negotiable promissory note or another form of negotiable
instrument, governed under Chinese law. Once created, the instrument is then sold
by the exporter to a Chinese investor through physical embodiment of the negotiable
instrument. Since the instruments are governed under Chinese law and owned by a
Chinese investor, they are free of most foreign law constraints. In this arrangement,
the Bank of China office in Frankfurt which participated in the pilot from Europe
with CLFS or CLFS itself could become the investor. The investor takes physical
possession of the instrument upon purchase, then presents the instrument to the car
importer for payment on the invoice maturity date. It may so happen that the
creation, acceptance, assignment and presentation of the instrument are all handled
by the investor. In that case the European exporter and Chinese importer do not need
to exchange any physical documents. If all the above are to happen in an electronic
platform then modern e-commerce laws that support use of negotiable documents in
electronic form through use of electronic transferable records must be adopted in
China to facilitate such transaction.
6 Rules for Supporting Better Information Exchange
and Facilitating Access to Finance
In 2017, the United Nations Commission on International Trade Law (UNCITRAL)
adopted the Model Law on Electronic Transferable Records (MLETR)
56 which can
be used as a specimen text by national lawmakers when preparing domestic law on
electronic transferable records.
57 UNCITRAL undertook the task of creating harmonized rules for electronic transferable records in 2011, to benefit the promotion of
electronic communications in international trade. Prior to that certain jurisdictions
had already promulgated national laws on the subject with different approach and
content to remove the obstacle of transferring the physical paper in original.
58
However, most of these national laws are technology specific and/or allow use of
electronic records that are not functionally equivalent to the paper form. In addition,
most of these laws deal with only one type of instrument/document in separate
56 http://www.uncitral.org/pdf/english/texts/electcom/MLETR_ebook.pdf.
57 The term “electronic transferable record” is used in this paper as an electronic equivalent of a
transferable instrument (negotiable or non-negotiable) or a document of title.
58 For example, the Korea Trade Net (KTNET), which was designated as the registry operator for the
purposes of the South Korean Presidential Decree on the Implementation of the Electronic Bill of
Lading Provisions of the Commercial Act of 2008, achieves exclusive control through this title
registry.
54
A. Basu Bal and T. Rajput