MANAMA: Bahrain has created history becoming the first in the world to enact a ground-breaking law to bridge trade and finance seamlessly and strengthen the digital economy.
The Model Law on Electronic Transferable Records (MLETR), developed by the United Nations Commission on International Trade Law (UNCITRAL), is a global first, it has emerged.
In strategic co-operation with the UNCITRAL secretariat, Bahrain has also revised its existing Electronic Transactions Law with new provisions that align with the United Nations Convention on the Use of Electronic Communications in International Contracts and renamed it the Electronic Communications and Transactions Law.
The move is part of a series of sweeping reforms aimed at bolstering the digital readiness of the GCC region’s $1.5 trillion economy.
A 2018 report by KPMG titled ‘The Cost of Doing Business in the GCC’ in the ICT sector recognised Bahrain as having the most liberalised and competitive ICT sector in the region with the lowest costs for critical ICT metrics, such as cross-border Internet connectivity.
While building on this foundation, the new laws further enhance the country’s competitiveness on a global scale.
The overall benefits of the legislation include:
• Electronic Transferable Records Law introduces electronic transferable records that are functionally equivalent to commercial documents and instruments issued on paper, such as bills of lading, bills of exchange, cheques, promissory notes and warehouse receipts.
These electronic documents allow the person who holds them to claim payment of a sum of money or delivery of certain goods, enabling the merger of the finance and logistics supply chains in a single data workflow.
• Electronic Communications and Transactions Law updates the current electronic transactions law and promotes a wider use of electronic communications in business.
Economic Development Board (EDB) chief executive Khalid Al Rumaihi said being the first in the world to adopt the UNCITRAL Model Law on Electronic Transferable Records gives the country an unrivalled advantage in the GCC region.
“Bahrain continues to lead the way in digital reforms. The new laws are a key step forward in achieving Vision 2030.”
Electronic transferable records and transactions offer unprecedented flexibility, speed, security and scope, covering the entire gamut of electronic commerce, including distributed ledgers such as blockchain.
These capabilities support the goals set by public-private partnership-led initiatives such as #TeamBahrain, which has succeeded in attracting investments from leading multinationals into the country.
“From a regional perspective, Bahrain has achieved many firsts in its 47-year history – from discovering oil to diversifying its economy, as well as driving innovation through the GCC region’s first fintech sandbox,” added Mr Al Rumaihi.
“We are confident that the new legislation will revolutionise the way we do business, develop talent and create a sustainable trading environment.”
Luca Castellani, secretary of Working Group IV (Electronic Commerce) of UNCITRAL, said Bahrain’s Model Law on Electronic Transferable Records, establishes a modern legislative framework for a digital-first economy by legally enabling the use of blockchain in fintech and logistics, among other things.
“The adoption of UNCITRAL texts, including the incorporation of additional provisions in the revised Electronic Transactions Law, helps create confidence in overseas traders and investors that Bahrain is committed to upholding modern commercial law standards and places Bahrain at the forefront of innovation and business-friendliness,” he added.
According to a blog post by Italian law firm Finocchiaro, the MLETR gives legal recognition to the use of electronically transferable records that are functionally equivalent to transferable documents and instruments such as bills of lading, bills of exchange, cheques, promissory notes and warehouse receipts.
Because of their electronic nature, transferable records may contain dynamic information not available on paper that permits the automation of certain functions.
For instance, a contract for sale of goods may foresee payment of part of the price when the ship carrying the goods arrives in a designated port.
An electronic bill of lading issued for that shipment may contain a reference to the position of the ship determined by the GPS.
Once the ship co-ordinates coincide with that of the port of destination, the electronic bill of landing may send automatically to the bank of the buyer an order to pay to the seller the due sum of money, said the law firm.
The MLETR also legally enables smart contracts and fintech, including by allowing the merger of finance and logistics supply chains in a single data workflow.
avinash@gdn.com.bh
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