Law Principles

discrimination principle by using legislative language in electronic commerce. Article 5 of the Model Law states that “Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message.”¹⁵⁸

This provision indicates that the form wherein certain information is presented or retained cannot be used as the only reason to deny the information of its legal effectiveness, validity, or enforceability. This same perception of non-discrimination is restated in paragraph 1 of Article 8 of the United Nations Convention on the Use of Electronic Communications in International Contracts.¹⁵⁹ However, this interpretation is only a rough sketch of the principle of non-discrimination.

According to the UNCITRAL, the principle of non-discrimination, as one of the fundamental principles of electronic commerce law, is designed to eliminate the nature of the medium as a reason to deny effect or enforceability to an electronic record, signature, or contract.¹⁶⁰ Clearly, the aforementioned provision is insufficient to fulfill this goal. Electronic communication can still be rejected by courts or other authorities because the data do not satisfy certain form requirements of domestic laws. Therefore, the content of this principle must be expanded. The UNCITRAL Model Law on Electronic Signatures stipulates that the place of origin of an electronic signature should not be a factor in determining the legal effect thereof.¹⁶¹ This provision broadened the principle of non-discrimination with fair and equal treatment of alien information. This model law also highlights that the legal effectivity of an electronic signature should not depend on geographical factors but solely on its technical reliability.¹⁶² This statement actually goes beyond the concept of non-discrimination and can be interpreted that electronic documents should be treated as equivalents of paper documents as long as they are proved reliable. Inspired by this idea, the principle of functional equivalence was established to set forth standards for reliable electronic documents. The next subsection reveals

158 Ibid.

159 United Nations Convention on the Use of Electronic Communications in International Contracts, available at https://www.uncitral.org/pdf/english/texts/electcom/06-57452_Ebook.pdf.

160 A/CN.9/WG.IV/WP.115, United Nations Commission on International Trade Law Working Group IV (Electronic Commerce) Forty-fifth session Vienna, 10-14 October 2011, available at

https://documents-dds-ny.un.org/doc/UNDOC/LTD/V11/855/64/PDF/V1185564.pdf?OpenElement.

161 See Article 12 of the Model law on Electronic Signatures.

162 Ibid.

the detailed content of this principle.

b. Functional Equivalence

The principle of functional equivalence supplements the principle of non-discrimination to an extent. Merely regulating that electronic data should not be denied their effect solely on the ground that it is in electronic form cannot guarantee the free use of electronic documents. Legal requirements in many jurisdictions prescribing the use of traditional paper-based documentation embody a significant obstacle to developing modern means of communication.

To allow states to adapt their laws to the developments in digitalization without the overall removal of paper-based requirements, the principle of functional equivalence suggests that when the functions of paper-based documents can be fulfilled by their electronic alternatives, the latter should enjoy the same level of legal recognition as the former. ¹⁶³

Given that documents in paper and digital format are different in nature, the UNCITRAL seeks to establish the functions that paper documents will perform and subsequently provides criteria that, if met, will enable electronic documents to be recognized in the same way. The Model Law on Electronic Commerce represents an implementation of the principle of functional equivalence. Instead of defining an electronic equivalent to any particular kind of paper document, the model law singles out the basic functions of the primary paper-based form requirements. ¹⁶⁴ The model law then sets forth criteria for the equivalence of basic functions of paper documents such as “writing,” “signature,” and “original.” When these criteria are met, the electronic equivalent should be granted equal legal value as the paper document. These criteria are designed in a general manner and usually constitute minimal requirements. For various types of documents, the requirements of functional equivalence should also change accordingly. A manuscript signature on a written contract for the rent of an apartment does not necessarily need to be highly secured. An electronic signature that indicates the signatory’s approval should suffice. By contrast, a transaction wherein cargos with great value are traded

163 Ibid. para 156.

164 See Introduction to the Model Law Part B paragraph 16. The functions of a paper document include: (a) to provide a document that will be legible by all, (b) to provide a document that will remain unaltered over time, (c) to allow for the reproduction of a document so that each party holds a copy of the same data, (d) to allow for the authentication of data by means of a signature, and (e) to provide a document in a form acceptable to public authorities and courts.

calls for a notarized contract. The requirements for an electronic equivalent in this case are high.

Although developing specific standards for all types of documents is desirable, it can also create the risk of giving preference to one or several technical solutions. Following the belief not to intertwine in technological developments, the UNCITRAL has established the principle of technology neutral.

c. Technology Neutrality

The principle of technology neutrality is derived from that of media neutrality.¹⁶⁵ When international legislatures realized that paperless communication can be the future, they first focused on the legal reorganization of the information carrier. The Hamburg Rules, which is adopted by the UNCITRAL on March 31, 1978, first addressed the legal status of intangible B/Ls by providing legal effect to the media carrying the information. Article 14(3) of this convention reads: “the signature on the bill of lading may be in handwriting (...) or made by any other mechanical or electronic means, if not inconsistent with the law of the country where the bill of lading is issued.”¹⁶⁶ This regulation first laid the foundation of media neutrality by affirming the legal status of electronic B/Ls.

This idea was subsequently promoted in the UNCITRAL Model Law on Electronic Commerce and absorbed in a manner consistent with the principle of non-discrimination to remove obstacles caused by the nature of the medium.¹⁶⁷ The UNCITRAL is aware that in certain commercial situations, the involvement of technologies in relation to issues other than medium is requested. For instance, digital signature requires the application of encryption technologies. Taking this concern into consideration, the UNCITRAL broadens the concept of medium neutrality and takes note of the application of new technologies. Given that electronic technologies evolve at a rapid pace, the UNCITRAL decides to avoid legislation that may preclude innovations or new applications. Consequently, the principle of technology neutrality

165 “Media Neutrality” indicates that the media on which the information is affixed should not be a factor in determining the legal effect of the information.

166 Art. 14 (3) of the Hamburg Rules.

167 See subsection 1 of this section.

is implemented to facilitate the development of electronic commerce in a way that neither helps nor hinders particular types of technology.

d. Party Autonomy

Aside from the aforementioned three principles, the UNCITRAL also supports the traditional civil law principle of party autonomy. This section has already explained that the UNCITRAL does not desire to develop fixed standards for all types of electronic records.¹⁶⁸ Instead, the UNCITRAL allows the free will of the contracting parties to decide which technology should be applied in their transactions. Other issues, such as the division of liability, offer and acceptance, and place of business and performance, should also be in the range of party autonomy. At the same time, the UNCITRAL is very careful not to let parties derogate from mandatory rules or otherwise invite states to restrict the freedom of parties.¹⁶⁹ Of note, the mandatory rules in this sense indicate the statutory rules of sovereign states and refers to the “minimum acceptable form requirements” set by the UNCITRAL laws.¹⁷⁰ In addition, the MLEC explicitly expressed that the “minimal requirements” do not mean that states should establish requirements stricter than those cited in the model law. On this ground, the principle of party autonomy is widely supported in the laws of electronic commerce, but this support is not unlimited. The principles serve the important role of allowing participants to apply electronic technologies that they regard as appropriate under the premise that the minimal acceptable form requirements are met.