The Electronic Trade Documents Act 2023 has received Royal Assent. The Act is based very closely on a draft Bill published by the Law Commission in March 2022.
It allows for the legal recognition of trade documents such as bills of lading and bills of exchange in electronic form. It was first introduced into the House of Lords under the special parliamentary procedure for Law Commission bills in October 2022.
The process of moving goods across borders involves a range of actors including transport, insurance, finance and logistics service providers. The Commission estimated that global container shipping generates billions of paper documents a year. Across so many documents, the potential positive impacts of using electronic trade documents – including financial and efficiency gains, and environmental benefits – are vast.
Despite the size and sophistication of this market, many of its processes, and the laws underlying them, are based on practices developed by merchants hundreds of years ago. In particular, under the current law of England and Wales, being the “holder” or having “possession” of a trade document has special significance. However, the law does not allow an electronic document to be possessed. As a result, nearly all documents used in international trade are still in paper form.
Over the past decade, the development of technologies such as distributed ledger technology has made trade based on electronic documents increasingly feasible. Without reform, the law would have lagged behind, hindering the adoption of electronic trade documents and preventing the significant benefits from being achieved.
If a trade document in electronic form satisfies the requirements of the Act, it is an “electronic trade document” and is capable of being possessed. The Act says that a trade document will be an “electronic trade document” under the Act if a reliable system is used to:
- identify the document so that it can be distinguished from any copies,
- protect the document against unauthorised alteration,
- secure that it is not possible for more than one person to exercise control of the document at any one time,
- allow any person who is able to exercise control of the document to demonstrate that the person is able to do so, and
- secure that a transfer of the document has effect to deprive a person who was able to exercise control of the document immediately before the transfer of the ability to do so (unless the person is able to exercise control by virtue of being a transferee).
The Act means that electronic trade documents, being possessable, will be treated in law in a manner equivalent to their paper counterparts and will have the same effects and be subject to the same treatment and dealings in all respects.
The Act comes into force in mid September.
