The Electronic Trade Documents Act comes into force today, 20th September 2023.
I have repeatedly described it as one of the most important laws you’ve never heard of because, although it is a small sounding law with a simple purpose – to permit electronic trade documents on the same legal basis as paper documents – it also holds such vast potential. Not just for international trade but for the development and adoption of distributed ledger technologies (DLT) and significantly, positively, on our environment. Estimates from the World Economic Forum suggest moves to electronic trade documents could reduce carbon emissions from logistics by as much as 10-12 per cent.
I was fortunate to be on the Special Public Bill Committee for the Bill as it progressed through Parliament. We scrutinized every comma and full stop and spent weeks on in-depth evidence sessions, which I have written about here, cross-examining witnesses, legal experts, technologists, and representatives from every part of the trading ecosystem to ensure the Bill was as precise as possible.
Our task was aided significantly by the work of the Law Commission who prepared the draft Bill. In essence this law needed to ensure that electronic trade documents would have the same status in law as the current paper version- a job complicated by the fact that trade documents, such as bills of lading and bills of exchange, rely on physical possession. You hold the paper you possess the goods.
How could this be replicated with electronic records without causing the dangerous consequence of establishing a legal principle that something intangible could be possess-able? How could we legislate for electronic documents to be unique and subject to the concept of possession in law?
The solution – as far as trade documents are concerned and possible only because of the technologies now available to us means that we are able to set out certain criteria that must be met in order for a digital document to be an ‘electronic trade document’. The criteria are set out in Clause 2 and state that an ‘electronic trade document’:
- must be identifiable so that it can be distinguishable from any copies
- must retain its integrity (not be altered without necessary authority
- must not be possible to have more than one person exercise control over it at any one time
- must be capable of being uniquely linked to that person and
- must be fully divested on transfer.
I have a long interest in distributed ledger technology (also known as blockchain), publishing a paper in 2017 that urged the Government to do more to ensure its benefits could be harnessed for public good. This new law is an excellent example of exactly what I was calling for. A government led initiative that will transform international trade for all our advantage and demonstrate a criteria-based approach to legislating new technology. A technologically neutral ‘blockchain’ bill as much as a trade bill.
The Electronic Trade Documents Act updates statute from 1882 that will enable technological innovation in international trade as well as consolidating English common law at the forefront of these developments. English law governs 80% of trade documents worldwide so there is a serious amount of attention on the way we are approaching this. We have done it well – we have also done it fast.
The Electronic Trade Documents Act is based on a model law on electronic transfer records (MLETR) passed in 2017 by the UN International Trade group. This model provides a framework that governments then need to align with their national legal systems. Although many countries have accepted the principle -including the G7- few have yet incorporated the law. Germany is expected to have full legislation later this year and France by 2025, probably 2024. China and the US are on similar time-frames. Singapore is one country that has already passed legislation, we are the first G7 country to do so. Our Electronic Trade Documents Act could become a model law for how to adopt the UNCITRAL model law.
Almost exactly a year after I first started writing about this (genuinely) world-leading piece of legislation I am thrilled that it has finally come into force.
We have undoubtedly achieved something significant, but in reality it is just the start. The change is, correctly, designed as permissive rather than mandatory. No-one will be forced to use digital documents; the statute simply and effectively sets out that option is now possible on exactly the same legal basis as paper trade documents.
A lot of work still needs to be done, incorporating the standards and building confidence in the systems. Crucially, everyone needs to communicate the potential of this world leading legislation. I am leading work on two fronts, in the UK, working with those in the trade ecosystem including financiers, extending to the business community and especially the SME community to enable them to connect, to feel comfortable using the provisions within the legislation. The second part of this is the international engagement, encouraging and supporting other jurisdictions to bring in similar legislation.
We all have a part to play. Last week I called on the Government to do more to communicate about the Electronic Trade Documents Act to businesses and potential trading partners. It is such a huge opportunity.
If we get this right we will benefit economically, environmentally, socially- together, globally.
Read about the Act on the Parliament website
The most important law you’ve never heard of, Computer Weekly
Government introduces Electronic Trade Documents Bill, Computer Weekly
UK’s ‘ground-breaking’ digital trade bill progresses, Global Government Fintech
Electronic Trade Documents Bill introduced to Parliament, Law Commission