Thursday, 23 November 2017

Blockchain Technology for Letters of Credit and Escrow Arrangements

Here is an article I have written on the basis of my presentation at the conference “Supply Chain Finance and the Changing Landscape of International Trade” held at the Gothenburg University (Sweden) on 23 October 2017.


An additional note (25 Nov 2017): This article has been accepted for publication from the Banking Law Journal and, after editing, is scheduled (tentatively) to appear in the February 2018 issue. The unedited Word version is kept here with permission.

Thursday, 2 November 2017

Blockchain Technology for Letter of Credit and Escrow Service

Here are the slides I used for my presentation at the Gothenburg University (Sweden) on 23 October 2017.
Very many thanks to Abhinayan Basu Bal for his invitation.

Tuesday, 24 October 2017

Two aspects of the blockchain technology

The blockchain technology enables the synchronisation of distributed ledgers without the involvement of a trusted intermediary. For this reason, it is often called "distributed ledger technology.” It helps enhance the security and integrity of data. Those benefits accrue in both public and private blockchains. Most of the recent initiatives of using blockchains in financial sectors tap into this aspect of the technology.

The blockchain technology is, however, not just about generating ledgers or a special way of doing it. Its greater potential for disrupting the society lies in the fact that it creates an online platform which enables the trustless P2P (peer-to-peer) trading of cryptocurrencies and other tokens. The core innovation of the Bitcoin's blockchain relates to this aspect of the technology. This feature is less conspicuous with private blockchains. Although the recent trend seems to lean in favour of private blockchains, the full potential of the blockchain technology would not be exploited if this aspect were neglected.

Friday, 1 September 2017

Powerpoint file: Implications of the blockchain technology for the UNCITRAL works

I prepared (but not actually used) a powerpoint file for my presentation at the UNCITRAL's 50th Anniversay Congress on 5th July. It is here.

Thursday, 15 June 2017

Implications of the Blockchain Technology for the UNCITRAL Works

I will be presenting my thoughts on the subject above in the upcoming Congress of the UNCITRAL for the celebration of its 50th anniversary (4-6 July 2017).
My paper currently on the Congress website is a version which I sent to the UNCITRAL Secretariat some months ago and which no longer represents my latest thinking in some significant respects. I am asking the Secretariat to replace it with the latest version, to which I make a link from here
The paper gives a particular emphasis on the topic of proprietary restitution of blockchain-based tokens as an area which calls for a globally unified solution.

Postscript: As from 16 June, the Congress website carries the latest version. Many thanks to the Secretariat for swiftly acting on my request. 

Tuesday, 18 April 2017

Relevance of the blockchain technology to the draft Model Law on Electronic Transferable Recores (as acknowledged by the latest official document)

My article, "Blockchain Technology and Electronic Bills of Lading", has examined the draft Model Law on Electronic Transferable Records and the Rotterdam Rules to see whether it is possible to interpret them in a manner compatible with blockchain-based bills of lading. What follows will note how the relevance of the blockchain technology has come to be acknowledged in the latest official document (A/CN.9/920 (2017)) which contains the draft Model Law with the draft explanatory notes.
The draft Model Law accommodates various types of electronic transferable records based on the principle of technology neutrality. The draft explanatory notes explain that reference in the Model Law to electronic transferable record management systems does not imply the existence of a system administrator or other form of centralized control (Para. 167). 
Nothing in the draft Model Law requires a person to use an electronic transferable record without that person’s consent (draft Article 6(2)). The draft explanatory notes state that consent to using distributed ledger based systems may be inferred by circumstances such as the exercise of control on the electronic transferable record or performance of the obligation contained in the electronic transferable record (Para. 48).
The draft Model Law is based on the principle of functional equivalence. Thus, where the applicable law provides for the endorsement of a transferable document, the draft Model Law treats an electronic transferable record as functionally equivalent to a transferable document only if the information required for the endorsement is “included in” the electronic transferable record (draft Article 16 on endorsement). The draft explanatory notes state that the words “included in” have been chosen to encompass instances when the information is logically associated with or otherwise linked to the electronic transferable record (Para. 141). This wide interpretation would accommodate the endorsement of a blockchain-based token through its transfer from one address to another on the blockchain.
Where there is a legal requirement of a signature of a person, an electronic transferable record can meet that requirement only if a reliable method is used to identify that person (draft Article 9 on signature). The draft explanatory notes acknowledge that certain electronic transferable records management systems, such as those based on distributed ledgers, may identify a signatory by referring to a pseudonym rather than a real name (Para. 60). The notes suggest that an identification by a pseudonym and the possibility of linking it to a real name, if need be, would satisfy the requirement to identify a signatory (Para. 60). The explanatory notes further suggest that linking of a pseudonym to a real name may be based on factual elements to be found outside distributed ledger systems (Para. 60). The same interpretation may be given to the notion of "identification" of the person in exclusive control of an electronic transferable record, a requirement which must be met to establish functional equivalence to the possession of a transferable document (draft Article 11(1) on control).

Friday, 31 March 2017

The relevance of the blockchain technology for the UNCITRAL Model Law on Electronic Commerce (1996), the UNCITRAL Model Law on Electronic Signatures (2001) and the UN Convention on the Use of Electronic Communications in International Contracts (2005)

One of the principles guiding UNCITRAL in its works in electronic commerce is the principle of technology neutrality or technological neutrality,[1] which means that the law should neither require nor assume the use of a particular technology for communicating or storing information electronically. The principle helps ensure that the law is able to accommodate future developments. Thus, blockchain technology, though not yet invented when those instruments were created, is not excluded from their scope of application.

It follows that under the Electronic Commerce Model Law, admissibility in evidence or other legal effect may not be denied to information solely on the ground that it is in the form of a data message stored in a blockchain (See Articles 5 and 9). Where only a hash value of information is stored in a blockchain, legal validity may not be denied to the information provided that it is referred to in the data message stored in the blockchain (See Article 5 bis added in 1998). In the context of contracts, an offer and the acceptance of an offer may be expressed by means of data messages on a blockchain (See Article 11 as affirmed by Article 8 of the Electronic Communications Convention). The performance of contractual obligations are also subject to the Model Law and the Convention. This has a particular relevance to a “smart contract,” a contract which can be automatically executed on a blockchain as programmed. Thus, where the communication of data messages such as notices of receipt of services, notices of failure to perform or notices of termination are programmed by a smart contract, they may not be denied legal effect solely on the ground that it is in the form of a data message (See Article 12 of the Model Law; Article 4(a) and Article 8 of the Convention). Article 12 of the Convention only mentions the formation of contract but the enacting States may wish to extend the idea to the phase of performance to cater for a smart contract. Thus, they may stipulate that the performance of a contract by an automated system may not be denied effect on the sole ground that no natural person intervened in each of the individual actions carried out by the automated system.

The principle of technological neutrality does not mean that any technology can create a data message which satisfies the paper-based requirements such as those of writing and signature. Only the technology capable of fulfilling the purposes and functions of the paper-based requirements can create a data message which is deemed to meet those requirements. This is called the principle of functional equivalence, another principle underlying the UNCITRAL works in electronic commerce. Thus, the Electronic Commerce Model Law sets out the conditions which a data message must meet to fulfill the purposes and functions of the paper-based requirements of writing and signature (Articles 6 and 7). The Electronic Signature Model Law elaborates on the conditions for the signature requirement. A data message stored in a blockchain is deemed to meet the requirements of writing and signature if it satisfies the respective conditions. The Electronic Commerce Model Law also provides that there must exist a reliable assurance as to the integrity of information contained in a data message before the information is deemed to satisfy the paper-based requirement that it be presented in its original form (Article 8). The blockchain technology is particularly apt to provide a reliable assurance as to the integrity of information since it is censorship resistant.


[1] See the Guide to Enactment of the Electronic Signatures Model Law (2001) para 5; the preamble of the Electronic Communications Convention. In the context of the Electronic Commerce Model Law, the expression “media-neutral” is used to convey the same idea (See the Guide to Enactment of the Electronic Commerce Model Law (1996) para 24). Only later, has that expression come to be understood as referring to non-discrimination between paper and electronic media (See the Guide to Enactment of the Electronic Signatures Model Law (2001) para 5).