Is it possible to endorse an electronic promissory note or bill of exchange?

For those who have joined me in this analysis since the previous article (and if you have not read it, I invite you to do so), you may remember that we considered the scope of Law No. 8454, Law on Certificates, Digital Signatures and Electronic Documents in this topic, as well as we analyze a series of questions about the legal possibility of expressing a promissory note or bill of exchange through an electronic document. 

Within the topics raised, we ask ourselves: 

• If I want to endorse a bill of exchange or promissory note embodied in an electronic document, how is that endorsement incorporated? 

• By incorporating the endorsement, am I altering the integrity of the electronic document for Article 6 of Law 8454, and could I risk its validity? 

Although we could indeed speak at the time (promulgation of Law 8454) that it was possible to conceive a promissory note or bill of exchange issued in an electronic document and signed using a digital signature certificate, as we commented previously, the challenge arises to guarantee that the file containing this electronic document is stored securely, guaranteeing its integrity, but that this action limits the free circulation of the document, and that, even if the document were circulated, there is no clear way to incorporate the endorsement in this security, nor to guarantee that it is the only electronic document issued, since there could perfectly well be several copies of the same electronic document (file) circulating and how can I guarantee a person the endorsement if I cannot guarantee that the file delivered is the only one that exists or the only one valid for payment? Let us also remember that the judicial means of execution does not allow this type of discussion since the debtor’s possibilities of opposition are limited to those expressly established by law. 

In short, as can be seen, there were many aspects that the legislation until that moment did not address, and therefore, legally, signing promissory notes or bills of exchange using electronic documents and digital signatures was not advised. 

The suggested restriction motivated the discussion and approval of a specific law on electronic bills of exchange and promissory notes, culminating in the enactment on November 9, 2021, of Law No. 10069, Law on Electronic Bills of Exchange and Promissory Notes. 

The first thing we must indicate is that this Law does not eliminate the physical promissory note and bills of exchange but, instead, regulates their existence in electronic format, making it clear that where the new law does not pertain, the rules of the existing law will continue to apply under the Commercial Code. 

This Law provides two ways to generate bills of exchange or promissory notes. One is by creating them directly in an electronic document (referred to by the law as “electronification”1, a term it creates but not yet recognized by the Royal Spanish Academy); the other by taking an existing physical one, proceeding to dematerialize it, and depositing the physical original in a Registration Center for safekeeping. 

As you may remember from the previous article, one of the challenges we posed in this area was to guarantee the principle that all securities rely on literality, non-alteration, and circulation, and guarantee the integrity and security of a promissory note or bill issued electronically. Meeting this challenge is the “Law on Electronic Bills of Exchange and Promissory Notes,” which creates the figure of Centralized Registries, where anyone with a promissory note or bill of exchange (electronic or dematerialized) can register it, creating the concept of account entries, an established practice in the securities markets, where each action taken on a promissory note or electronic bill of exchange, whether called registration, endorsement, assignment, cancellation, etc., will be duly registered by the Centralized Registry, thus enabling literality, non-alteration and the possibility of circulating said documents (although under the custody of the Centralized Registry), and also guaranteeing their integrity and security, since they cannot be altered or modified without intervention of the Centralized Registry, being ultimately the agency that will later certify the existence of this unique document, without alteration, and identifying its legitimate owner for implementation. 

Among the novelties created by this Law is the establishment that the person who appears as such in the account entry made in the Centralized Registry will be considered the legitimate holder (Article 7) of the bill of exchange or electronic promissory note. For its part, the law also indicates (Article 8) that the dematerialization, issuance, custody, administration, endorsement, circulation, attachment, encumbrance, embargo, and any exchange act will be perfected using the account entry, thus answering the questions that we proposed at the beginning of this article. 

Public or private entities can manage centralized registries as long as the General Superintendency of Securities (SUGEVAL) grants them the right. This legislation establishes the requirements for registering an entity as a Centralized Registry. 

This legislation establishes four principles applicable to electronic bills of exchange and promissory notes. First, the principle of priority states that once a dematerialized document has been registered using an account entry, no other annotation may be made regarding the same document due to an event that occurred before the entry into account. Secondly, the principle of successive tract requires that any movement on a bill of exchange or electronic promissory note recorded in an account must be chained chronologically, sequentially and uninterruptedly; Thirdly, the principle of rogation states that only the legitimate holder can make registration or book entries. Lastly, the principle of good faith considers whoever appears as the owner in the account entry as its legitimate owner.  

Thus, the “Law on Electronic Bill of Exchange and Promissory Notes” was necessary to fill the gaps not answered by Law No. 8454, Law on Certificates, Digital Signatures and Electronic Documents, concerning bills of exchange and electronic promissory notes. Now, we must ask ourselves: how is an electronic promissory note or bill of exchange collected? We analyze the response in the following article.