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Digitalising Singapore: the new ETA and its impact on e-Bills of Lading7 May 2021

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In a world where processes are becoming increasingly digitalised, the recent amendments to Singapore’s Electronic Transactions Act (“ETA”), as effected by the Electronic Transactions (Amendment) Act 2021 (the “Amendment Act”), are timely and pave the way for companies in shipping and logistics to improve supply chain efficiency. In this article, we discuss some key benefits of the Amendment Act and its impact on the maritime sector especially as regards e-bills of lading. Finally, we also provide a Q&A covering commonly asked questions on the Amendment Act.

"Studies have also shown that the cost of processing physical trade documents can constitute up to 20% of transportation costs."

The benefits

Below, we have listed a few key benefits that companies will enjoy should they choose to digitalise trade documentation.

1. Faster transmission

Typically, physical possession of documents of title and bills of lading are required for a transaction to close. The lead time for such hard copy documents to be sent to the respective parties can often hold up closings as, for various reasons, it may be difficult to obtain wet-ink signatures and documents may get stuck in transit. With the Amendment Act, these documents can now be digitally executed and transmitted with the click of a button, thereby saving time and increasing efficiency.

2. Lower costs

No longer requiring physical copies of such documents will inevitably result in cost savings as less paper is used, less printing required and less legal, courier and storage charges incurred. Studies have also shown that the cost of processing physical trade documents can constitute up to 20% of transportation costs¹.

3. Increased accuracy

With the information on transferable records becoming electronic, there will be less risk of human error when it comes to reading and transferring information. The ease of updating electronic transferable records (“ETRs”) would also encourage companies to keep them up-to-date.

4. Reduced risk of fraud and forgery

There is always a risk that a signature on a paper-based document is a forgery. With the recent amendments to the ETA, more documents can now be digitalised and signatures reliably verified through digital authentication systems. Using blockchain technology will also mean a significantly reduced risk of fraud given the prohibitive difficulty of hacking blockchain.

5. Easier storage and retrieval

Companies will save physical space storing hard-copy documents and be able to find documentation more easily if digitalised and kept in soft-copy format only. This time-saver also adds to the overarching theme of greater efficiency.

6. Environmentally friendly

Ostensibly, digitalisation of trade documents should lead to a decrease in paper usage and by extension, be good for the environment. However, it remains to be seen whether this will be the case in reality as the large amount of electricity required to power systems and blockchain technology has come under scrutiny in recent years for not always being environmentally friendly.

"TradeTrust is a digital utility made up of globally-accepted standards and frameworks that provides proof of authenticity of documents and offers title transfer through open-source software."

Impact of the Amendment Act on e-Bills of Lading

Along with domestic and international agencies and industry partners, the Infocomm Media Development Authority of Singapore (“IMDA”) is spearheading the implementation of TradeTrust, a digital utility made up of globally-accepted standards and frameworks that provides proof of authenticity of documents and offers title transfer through open-source software, enabling digital trade documents to be used with ease, including e-bills of lading (“eBLs”). Progress on implementing TradeTrust has been promising, as evidenced by the successful title transfer trials using eBLs conducted by the IMDA in collaboration with the Maritime and Port Authority of Singapore (“MPA”) with both local and overseas partners, such as the Port of Rotterdam Authority in The Netherlands and the Commerce Bureau of Shenzhen Municipality. In 2019, DBS Bank and Trafigura also utilised the TradeTrust infrastructure to conduct a successful pilot trade of US$20m worth of iron ore shipped from South Africa to China in November 2019. The end-to-end trade documentation transit time in this trade was cut from 45 to 20 days.

As the changes wrought by the Amendment Act have only come into force recently, it is too early to conclude whether they will be effective in increasing the use of eBLs in the maritime sector. Based on a survey conducted by the MPA in March 2021, 61% of the participants indicated that eBLs have not been adopted at their Singapore offices and close to 60% of the participants pointed to customers’ and financiers’ acceptance as the immediate next step to increase the use of eBLs in their operations.  In support of these statistics, some early adopters of eBLs have been vocal about the handful of “barriers to entry” they face, which include:

  • the lack of marketing and promotion and corresponding lack of awareness of digitalisation efforts within the industry;
  • the lack of understanding of the technology required and the internal infrastructure and support necessary to maintain the technology;
  • the traditional mindset that hard copy originals signed in wet-ink are more reliable and valuable; and
  • the absence of a conducive ecosystem for digitalisation. For instance, where only one part of the process is digitalised in silo, it may not be more efficient for the trade as a whole, since the remaining parts may have to adapt around the digitalisation and cost parties more time.

"While the TradeTrust trials predict a promising future for the adoption of eBLs and the digitalisation of trade documentation, assimilation of such digitalisation will not happen overnight."

While the TradeTrust trials predict a promising future for the adoption of eBLs and the digitalisation of trade documentation, the factors listed above indicate that assimilation of such digitalisation will not happen overnight. Without all parties in the supply chain being fully onboard with digitalisation, it may be some time yet before we can see eBLs being ubiquitous.

Q&A

Given the constantly evolving legislation surrounding execution and enforceability of ETRs, set out below are (1) the legislative background to the ETA and (2) answers to some of the commonly asked questions by professional and corporate entities when it comes to the execution of documents in Singapore.

QuestionsAnswers
What is the ETA?The ETA was first enacted in 1998 and contains provisions that confirm the legal enforceability of electronic records and digital signatures (but operates without prejudice to the legal enforceability of electronic records and digital signatures recognised at common law). On 1 February 2021, the Electronic Transactions (Amendments) Bill (the “Bill”) was passed in Parliament and the Amendment Act came into operation shortly thereafter on 19 March 2021. The purpose of the Bill was to (1) drive digitalisation to increase trade efficiency and (2) align Singapore with the standards implemented by the UNCITRAL Model Law on ETRs.
What were the key amendments to the ETA following the Amendment Act?Prior to the Amendment Act, the ETA excluded certain kinds of documents from its ambit, including:
• bills of lading;
• negotiable instruments;
• documents of title;
• bills of exchange;
• promissory notes;
• consignment notes;
• warehouse receipts; and
• any transferable document or instrument that entitles the bearer or beneficiary to claim the delivery of goods or the payment of a sum of money.

Following the introduction of the Amendment Act, these previously-excluded documents are now accepted as ETRs. Such ETRs are treated the same as paper documents under the ETA.

It is also important to note, however, that the following kinds of documents remain excluded from the ambit of the ETA:
• wills;
• indentures;
• declarations of trust or powers of attorney;
• contracts of sale or disposition of immovable property; and
• conveyances or transfers of any interests in immovable property.

Notwithstanding their current exclusion, the Bill clarifies that these items will also be accepted as ETRs once there is legislative and administrative infrastructure to support their digitalisation for the purposes of the ETA.
What amounts to a valid electronic signature under the ETA?For an electronic signature to be valid, two requirements apply:
(1) a method is used to identify the signature; and
(2) the method used is reliable.
What documents are within the ambit of the ETA?The ETA expressly provides that documents that can be validly executed by hand using “wet ink” signatures can be executed electronically and afforded the enhanced legal protections conferred by the ETA on such electronic execution, unless excluded from the ambit of the ETA (see below).

Following the Bill, certain types of deeds are now permitted to be executed electronically such as promissory notes, documents of title, and bills of lading (the “Permitted Deeds”).
What documents are excluded from the ambit of the ETA?Certain types of documents continue to be excluded from the ambit of the ETA. These include, among others, declarations of trusts, executions of wills and contracts for the sale of immovable properties (the “Excluded Documents”).

There remains a question as to whether deeds (that are not Permitted Deeds) governed by Singapore law or which are to be executed in Singapore can be executed electronically. This uncertainty arises from the additional legal formalities required for their execution, although the ETA does not expressly exclude deeds from the ambit of electronic execution. Thus, where deeds are involved (and where that specific type of deed is not expressly provided for under the ETA), it is prudent for wet ink signatures to be obtained as far as possible.

Nevertheless, it may be possible for certain Excluded Documents to be electronically executed in reliance of the common law (to the extent that the common law permits such execution):
- Trust Instruments: where there is no express rule of law requiring writing or signatures for a particular declaration of trust (e.g. a declaration of trust over movable property) and the contracting parties are commercially comfortable with executing such declaration of trust by hand, the parties may choose to execute that declaration of trust by hand through electronic signatures.
- Leases: even though a lease is a document excluded from the ambit of electronic execution by the ETA, the High Court in SM Integrated Transware v Schenker Singapore [2005] 2 SLR 651 recognised as valid a lease that was electronically concluded via e-mail.
Can corporate authorities be executed electronically pursuant to the ETA?- The following documents generally may be electronically signed pursuant to the ETA: (1) board/shareholder minutes and written resolutions and proxy forms, (2) directors’ consent and resignation letters and (3) certification letters on general matters; and

- Where a company’s constitution prescribes procedures and requirements for the electronic execution of documents, these procedures and requirements must be adhered to in order for the corporate authorities to be properly executed.
Do government bodies and statutory bodies in Singapore accept electronically executed documents?This depends on the government body.

MPA

- Currently, all documents must be in wet ink signature be it the mortgage, power of attorney, letters of confirmations, certificates of title, builders’ certificate and other shipping/maritime documents.

The Accounting and Corporate Regulatory Authority of Singapore ("ACRA")

- ACRA accepts electronically signed documents during the Covid-19 period insofar as the Covid-19 (Temporary Measures) Act permits for it;
- The electronic signature accepted must comply with the guidance issued by the IMDA; and

- Aside from special exceptions like Covid-19, ACRA expects documents to typically be signed in wet ink.

Civil Aviation Authority of Singapore ("CAAS")

- As applications are typically made through the electronic portal using CorpPass or SingPass, signature verification is not essential most of the time; and

- Nonetheless, where parties intend to use electronic signatures for any physical form submission, parties should write into CAAS, in advance, to check if electronic signatures are accepted in respect of such form or supporting documents to such forms.
Do courts accept electronically executed documents?- A risk-based approach may have to be adopted where the documents to be executed involve high value transactions or where the transactions involve certain difficulties with signature verification. In these instances, parties may need to consider the mechanism by which the electronic signature may be verified on signing. Generally, when in doubt and until the law is established, the suggestion is to execute documents with wet-ink signatures.
If I am unsure whether my document may be executed electronically and it is not stated inside the Electronic Transactions Act, how should I proceed?- A risk-based approach may have to be adopted where the documents to be executed involve high value transactions or where the transactions involve certain difficulties with signature verification. In these instances, parties may need to consider the mechanism by which the electronic signature may be verified on signing. Generally, absent legal advice to the contrary and until the law is established, the suggestion is to execute documents with wet-ink signatures.
Cross Border Transactions- If a document executed electronically in Singapore is intended for submission to an authority overseas, parties should always check with lawyers in the local jurisdiction to ensure that electronically signed documents are accepted in that jurisdiction.
This article was co-authored by Yuan Lee, Associate Director at our Formal Law Alliance Partners Wong Tan & Molly Lim, Singapore.

[1] According to a Maersk and IBM paper trail research study conducted in 2014.
[2] These exclusions were previously set out in item 2 of the First Schedule of the ETA, before the Amendment Act cam into effect.
[3] These exclusions are set out in the First Schedule of the ETA currently in force.

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