Estimated reading time: 5 minutes
One small bill for parliament, one giant leap for trade digitalisation
Estimated reading time: 5 minutes
On 12 October, the UK officially introduced The Electronic Trade Documents Bill into parliament, the next step in a long road to shred the country’s legally imposed reliance on using paper for trade documents.
The new Bill, which has been anticipated since it was announced during the Queen’s Speech in May, is welcomed by businesses and industry leaders across the country, including the British Chamber of Commerce and the International Trade and Forfaiting Association (ITFA).
“We welcome the changes that the bill will bring about, but this is not just about pure legal change,” ITFA Chairman Sean Edwards said.
“The bill will also break psychological barriers by emboldening market players to consider doing something they would never have before.
“More importantly, we now need to make a business out of the new opportunities.”
Age-old trade governed by 19th-century legislation
Under current legislation, such as the Bills of Exchange Act 1882 and the Carriage of Goods by Sea Act 1992, business-to-business documents like the bill of lading and bill of exchange must exist on paper to be legally recognised.
“To date, under English law and many other legal systems, only tangible assets have been capable of being possessed,” Catherine Lang-Anderson, partner at Allen & Overy, said.
“The Electronic Trade Documents Act enshrines the idea that electronic trade documents such as bills of lading, warehouse receipts, and promissory notes are capable of being “possessed”. As a result, this unlocks powerful legal rights following from possession of those types of electronic documents.
“The Act represents a major step forward in the industry’s ongoing efforts to digitalise trade and ensure trade finance techniques are a match fit for the future.”
Once passed, the bill will provide the legal basis for traders to transition to a digital-first trade document environment and will likely provoke other jurisdictions to follow suit.
“The UK Electronic Trade Documents Bill will put rocket boosters under the digitalisation of world trade,” Chris Southworth, secretary general of ICC United Kingdom, said.
“It will lay the path for 80% of all bills of lading worldwide to go digital, a dramatic increase from the current 1%.”
Gunnar Collin, head of trade finance sales at Enigio, added: “We see this as a game changer for the digitalisation of trade and we are very happy that our solution for digital original trade documents can help in making this a reality.
“Banks, corporates, logistic providers and others can soon benefit from all the advantages that paper documents have but without any of its shortcomings.”
One step of many
While legislative progress in the UK is a critical first step, since international trade is multi-jurisdictional by nature, this on its own is not enough and the full benefits will only be realised when other jurisdictions begin to follow suit.
“It is at moments like these that we need to get across to other governments when we make the case for them to also reform and modernise legal frameworks,” Chris Southworth said.
Catherine Lang-Anderson added: “The next steps will be for other jurisdictions that haven’t already done so to enshrine similar principles in their laws, following on from the UNCITRAL Model Law on Electronic Transferable Records (MLETR) which was adopted in 2017.
“A particular trade transaction will only be capable of being fully digitalised when all relevant legal systems to the trade recognise digital trade documents.
“Until then, we expect progress to continue—including by parties using existing contractual frameworks and by taking advantage of the ability under the Act to convert trade documents from electronic to paper and back again depending on what is needed on a particular leg of a transaction.”
The UK is considered a key precedent-setting jurisdiction to pass this kind of legislation since many other legal systems around the world are based on the English model.
This coupled with the eagerness of businesses in the space to digitalise their offerings is likely to put pressure on lawmakers in other jurisdictions to follow suit.
Professor Sarah Green, Commercial and Common Law Commissioner, said, “we are pleased that our recommendations and draft legislation have now been introduced to Parliament through this Bill. If enacted, these changes will bring the law into the 21st century, generating benefits on an international scale.”
In August, Lloyds bank announced that they completed the UK’s first digital promissory note purchase using Enigio’s trace:original technology and following these ITFA standards.
“ITFA’s digital negotiable instrument (DNI) initiative, electronic payment undertaking (ePU), and digital document (dDOC) specifications, already utilised by Lloyds, are key enablers to make this happen,” Sean Edwards said.
This effort illustrated how the digitisation of trade––through focusing on documents––has progressed practically.
From a customs and border perspective, there are also benefits.
Marco Forgione, Director General, Institute of Export & International Trade, told TFG: “The bill would place electronic trading documents on the same legal footing as paper documents and enable businesses to move from paper-based to digital-based transactions.
“The IOE&IT is already helping deliver the government‘s 2025 UK Border Strategy with the ecosystem of trust pilots and supporting with industry engagement on the single trade window. This Bill is an essential part of creating a world leading border system and encouraging more trade.” Forgione said.
The introduction of this new Bill into the UK parliament illustrates how these efforts are progressing legislatively.