By: Randall Barquero
On Thursday, December 9, 2021, Law # 10,069 “Law on Electronic Bills of Exchange and Promissory Notes” was published in the Official Gazette La Gaceta, which provides an excellent opportunity to encourage the use of technology in our country and boost access to credit in a safe and efficient manner, through the use of these securities in electronic format. This new Law only introduces the necessary changes in current legislation with the purpose of maintaining the existing substantive regulations unalterable and that their interpretation is applicable to these securities in electronic format. In all matters not provided for in the new Law, the rules already in force in the Commercial Code will remain applicable, which will be complemented with other international principles of electronic commerce law incorporated in our legislation, such as: technological neutrality, functional equivalence, inalteration of pre-existing law, equivalent value of the signature and others included in the Law on Certificates, Digital Signatures and Electronic Documents, also allowing to reinforce the use of both the digital signature and the digital signature certificate established therein.
The Law creates the figure of “Centralized Registries” which will be entities authorized by the General Superintendence of Securities (SUGEVAL) or central securities registries already supervised by said Superintendence in accordance with the Securities Market Regulatory Law. These Centralized Registries may be public or private entities authorized to register electronic bills of exchange and promissory notes, their dematerialization, issuance, custody, administration, endorsement, circulation, affectation, encumbrance, seizure and any exchange act, under the form of book entries, a very well known and applied figure in our securities market.
Among the main functions that the Centralized Registries may perform are: (a) making book entries and keeping their registration, guaranteeing their total traceability; (b) managing and keeping custody of the electronic securities deposited with them; (c) dematerializing bills of exchange and promissory notes issued on paper whose legitimate holders so wish, which will make it possible to migrate existing credit portfolios to electronic format; (d) registering by book entry all types of encumbrances on rights contained in the securities and even precautionary measures that fall on them; This should make it possible, for example, to constitute movable guarantees on a credit portfolio documented by means of electronic promissory notes registered in the Registries and thus facilitate “second floor” financing; (e) issue the electronic certification that allows the judicial collection of the debts documented in the electronic bills of exchange and promissory notes – for which the Law grants executive title to the certificates issued by the Centralized Registries, where the holding of the rights incorporated in the electronic instruments is accredited; and (f) other complementary services authorized by the SUGEVAL.
The electronic registration of the bill of exchange and promissory note made by these Registries must respect principles already recognized in matters of registration, such as priority (known as “first in time, first in right”), successive tract (registrations must have a chronological, sequential and uninterrupted chain), rogation (the request of the legitimate holder is required for each registration) and good faith (whoever appears as holder in the account entry will be presumed to be the legitimate holder).
The Centralized Registries seek to guarantee the uniqueness of the electronic security, that is to say, that there are no duplicates of a security and therefore avoid the collection of a debt more than once. For this purpose, these entities must have technologies and security mechanisms to guarantee the proper handling of information and control of the issuance and circulation of securities, as a trusted third party. At this point a great opportunity opens up for the Centralized Registries to incorporate new technologies, for example blockchain, into their systems, for which they must comply with the technical and computer security requirements established by SUGEVAL, an entity that has issued provisions in this regard that other entities already subject to its supervision must comply with.
The Law establishes a term of 6 months from its effective date for the National Council of Supervision of the Financial System (CONASSIF) to issue the corresponding Regulation, which must develop several of the aspects indicated in the Law. Once these regulations are issued, SUGEVAL will be responsible for authorizing and supervising the Centralized Registries.
The Law on Electronic Bills of Exchange and Promissory Notes represents a milestone for commercial law in Costa Rica, while at the same time it encourages the support of technology for the dynamization of credit through the digitalization of these securities in an environment of security that generates confidence in the market. Additionally, in the context of the social and economic dynamics generated by the pandemic, it will contribute to avoid trips to sign physical documents, reducing costs for all parties and at the same time supporting bankarization and access to credit for all social sectors.