Functional Equivalence


As has been mentioned previously, one of the key issues faced in the digitalisation of the trade world is the treatment of digital documents in order to ensure they receive the same interpretation as paper documents.


This is now one of the more significant topics being addressed by the ‘Framework for G7 collaboration on Electronic Transferable Records' to promote the adoption of legal frameworks compatible with the UNCITRAL Model Law on Electronic Transferable Records 2017.


In addition, individual countries are reviewing their legislature with a view to introducing the necessary law. Some have now reached this stage.


In the meantime, it is worth remembering that it is already possible to provide for such equivalence under ICC rules such as eUCP Version 2.0 and URDTT Version 1.0.


The eUCP added the term ‘electronic record' to the meaning of ‘document' as used in UCP 600. It is important that the impact of applicable local electronic commerce law always be taken into account. However, based upon the fact that the eUCP definitions are modelled on UNCITRAL Model Laws including those on Electronic Commerce (MLEC) and Electronic Transferable Records (MLETR), it is understood that there will be no particular conflict with the eUCP definition of ‘document'. The URDTT have also included the definition for an ‘electronic record'*.


The UNCITRAL Model Laws rely on a ‘functional equivalent approach', which is based on an analysis of the purposes and functions of the traditional paper- based requirement with a view to determining how those purposes or functions could be fulfilled through electronic commerce techniques. For example, among the functions served by a paper document are the following: to provide that a document would be legible by all; to provide that a document would remain unaltered over time; to allow for the reproduction of a document so that each party would hold a copy of the same data; to allow for the authentication of data by means of a signature; and to provide that a document would be in a form acceptable to public authorities and courts. 


It should be noted that in respect of all of the above-mentioned functions of paper, electronic records can provide the same level of security as paper and, in most cases, a much higher degree of reliability and speed, especially with respect to the identification of the source and content of the data, provided that a number of technical and legal requirements are met. 


However, the adoption of the functional-equivalent approach should not result in imposing on users of electronic commerce more stringent standards of security (and any related costs) than in a paper-based environment. A data message, in and of itself, cannot be regarded as an equivalent of a paper document in that it is of a different nature and does not necessarily perform all conceivable functions of a paper document. 


That is why the UNCITRAL Model Laws adopted a flexible standard, taking into account the various layers of existing requirements in a paper-based environment: when adopting the ‘functional-equivalent' approach, attention was given to the existing hierarchy of form requirements, which provides distinct levels of reliability, traceability and unalterability with respect to paper-based documents. For example, the requirement that data be presented in written form (which constitutes a ‘threshold requirement') is not to be confused with more stringent requirements such as ‘signed writing', ‘signed original' or ‘authenticated legal act'. The UNCITRAL Model Laws do not attempt to define a computer-based equivalent to any kind of paper document. Instead, they single out basic functions of paper-based form requirements, with a view to providing criteria which, once they are met by data messages, enable such data messages to enjoy the same level of legal recognition as corresponding paper documents performing the same function. 





* Electronic Record means data created, generated, sent, communicated, Received or stored by electronic means, including, where appropriate, all information logically associated with or otherwise linked together so as to become part of the record, whether generated contemporaneously or not, that is: 

  • capable of being authenticated as to the apparent identity of a Submitter and the apparent source of the data contained in it and as to whether it has remained complete and unaltered; and 
  • capable of being examined for compliance with the terms and conditions of a Digital Trade Transaction. 




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