Australia’s international trade may get a bit of a boost depending upon the outcome of a reform underway by the Attorney General’s office; it’s looking at options to bring the UN Model Law on Transferable Records into Australian Law.
UN Model Law On Electronic Transferable Records
The UN Model Law on Electronic Transferable Records was published in 2017 and it is a set of would-be laws that, if implemented into the domestic laws of a country would in theory boost confidence that laws would apply to digital records jus as they do to electronic records. As we will see below, there are a lot of gains to be had in boosting electronic commerce. According to an explanatory note attached to the text of the UN Model Law, it “applies to electronic transferable records that are the functional equivalent of transferable documents or instruments. Transferable documents or instruments are paper-based documents or instruments that entitle the holder to claim the performance of the obligation therein and that allow the transfer of the claim to that performance by transferring the document or instrument. The law of each jurisdiction will determine which documents or instruments are transferable”.
Australian law
Australian law is apparently posing some concerns. The AG is looking to understand which Australian laws may relate to the “possession” or transfer of transferable records, the issue of whether transferrable records are a form of personal property (and, if so, what are the implications of the Personal Properties Securities Act (or other property law)), evidentiary and regulatory requirements, and how all this works with the Electronic Transactions Act (Commonwealth).
Australia’s federal Electronic Transactions Act, together with the State and Territory versions of the Electronic Transactions Act, create a largely same-ish legal approach across Australia although, as ever, there are different exemptions and other differences. The Australian regime was based on the UN Model Law on Electronic Commerce … which is getting on a bit in age these days as it was developed back in 1996. That was nearly 30 years ago (I bet that makes you feel a lot older than you felt a few seconds prior!)
The AG’s Department reckons that the current Australian system doesn’t really allow for electronic transferable records because, among other things, it does not confirm how processes like “possessing” or “transferring” a unique paper document can be achieved by computer, although the Acts do provided for the legal equality of paper / electronic notices and signatures. Secondly, some types of transferrable records are exempt from the application of the Australian Electronic Transactions Acts, for example, the Electronic Transactions (Queensland) Act 2001 specifically exempts certain transferable records from its application.
A rabble of regulators, bales of paperwork, an epoch of work-hours
This potential reform is part of the the Simplified Trade Systems reform which aims to simplify Australia’s cross-border trade. And, oh gosh, the cross-borders system as a whole is direly in need of streamlining. There are about 32 Australian Government agencies that are involved with Australian trade, and they’re operating 145 ICT systems, and are involved with over 200 regulation for imports and exports, according to the Simplified Trade System website. An older government Australian Maritime Single Window document, from about 2022, shows that each ship submits at least 19 documents to regulators every time it arrives and departs Australia… and there are over 6,200 ships making about 17,300 international voyages to and from Australia each year. Over 35,000 work hours are spend on reporting every year.
Costs, costs, costs
All of this costs, and it costs a lot.
Improved trade facilitation measures could result in a 3.7% decrease in maritime transport costs, according to a recent submission (1) to the IMO’s MEPC 82, held in October this year. Trade transaction costs related to border procedures vary by circumstances / context / situation and studies suggest that directly and indirectly incurred trade transaction costs each amount to anywhere between one percent to 15 percent of the value of traded goods (2). Assuming ssuming trade facilitation leads to a reduction in trade transaction costs of 1% of the value of world trade, then aggregate welfare gains are estimated at about USD$40 billion worldwide, with all countries benefiting (3).
So any simplification is, or should be, welcome as it cuts trade and maritime transport costs and that, ultimately, should boost the well-being of the Australian – and global – populations.
A bit of a squint and a stickybeak
So the Attorney General’s Department is having a bit of a squint at, and a stickybeak into, how cross-border traders, and people who cross the border (i.e. marine types), experience the paperwork involved with entering and leaving Australia. The aim is to help the AG’s office to develop potential implementation options for the UN Model Law on Electronic Transferable Records and to advise Government on which option would be best for Australia.
Meanwhile, as any trader knows, moving goods across the border means dealing with a whole heap of documents such as bills of lading, promissory notes, bills of exchange, warehouse receipts, insurance certificates, letters of credit, dock warrants… and more, and more yet, and yet more again…
The AG’s office is examining how transferable records are used in day-to-day business practices, in the context of trade, how much time is spend dealing with paper-based records vs savings to be made by electronic records, financial savings and more. It is particularly examining the the legal validity of electronic records.
Shipping Australia’s position
Shipping Australia has been, and is, broadly supportive of any measures to streamline, simplify, and reduce the paperwork associated with maritime transport and international trade. Quite literally, the well-being of practically everyone in the world depends upon the simplification of trade to some degree. And, as the world population continues to grow (we’re predicted to peak at about 10.5 billion people) and as the world continues to become more complex, the simplification of trade is only going to become more and more important.
In our submission, we noted the volume of international shipping into / out of Australia and the importance of trade to this nation. We also talked of transaction costs in trade and how everyone would be much better off if the transaction costs were lower. We supported the adoption of the Model Law on Electronic Transferable Records as a policy that would lower trade costs, promote harmonisation and certainty in trade and shipping, and would likely lead to the overall increase in well-being of the Australian population.
However, we were concerned that that Attorney General’s Department is of the view that “Any adoption of the MLETR may include such modification or changes necessary to address any unique Australian legal circumstances which are identified in the consultation process”. Shipping Australia is concerned at, and generally opposed to, the philosophy that lies behind that comment. Deviation from international standards that cause traders and businesses to have to adapt to unique Australian circumstances can be regarded as a form of trade transaction cost. Given the costs of trade transaction costs and the consequence of harmful consequences for population well-being, such deviation from the international standard ought to be resisted as much as is possible.
Where there are unique Australian circumstances, then the better policy approach is for the Attorney General’s Department to use its utmost and absolute best efforts to remove / resolve / change the unique Australian circumstance i.e. it is better public policy in this area of law to modify Australian law to accommodate the international law and the international approach rather than modify the international approach to accommodate Australian circumstances. Of course, we recognise that, in some circumstances it might not be feasible to attempt to change, or change, the unique Australian circumstances. It’s probably not a good idea to scrap and re-write the whole Australian Constitution just so that the use of consignment notes are digitalised.
We also argue that additional rules, policies, regulations, guidance, laws, etc should not be introduced on top of or additional to the implementation of the Model Law into Australian law for the purposes of achieving other policy goals. Or, to put it this way, “no public policy piggybacking”.
Finally, we believe that it is both vital and imperative that Article 19(1) of the Model Law on Electronic Transferable Records is implemented. That Article states that “an electronic transferable record shall not be denied legal effect, validity, or enforceability on the sole ground that it was issued or used abroad” should be incorporated in full into the legal instrument that implements the Model Law into Australian law.
Further Reading & Notes
(1) “Reduction of GHG emissions from ships,” submission to the Marine Environment Protection Committee No. 82 of 30 Sept to 04 October 2024 of the International Maritime Organization, Agenda Session Item 7, Report of the Comprehensive impact assessment of the basket of candidate GHG reduction mid-term measures – full report on Task 1, 26 July 2024, pages 21 and 67.
(2) “Quantitative Methods for Assessing the Effects of Non-Tariff Measures and Trade Facilitation pp. 161-192 (2005), Benefits of Trade Facilitation: A Quantitative Assessment; Walkenhorst P, and Yasui, T; doi.org/10.1142/9789812701350_0009.
(3) “Quantitative assessment of the benefits of trade facilitation,” by Walkenhorst, P. and Yasui, T. in “Overcoming Border Bottlenecks: the costs and benefits of trade facilitation,” ISBN 978-92-64-05694, OECD 2009.
“Consultation to inform options for implementing the Model Law on Electronic Transferable Records in Australia,” Attorney-General’s Department, Australian Government, 2024.
