In September 2020, the Department for Digital, Culture, Media and Sport (DCMS) in the UK asked the UK Law Commission to make recommendations to solve the problems caused by the law's approach to the "possession" and transfer of electronic documents. DCMS also asked the Law Commission to prepare draft legislation to implement those recommendations.
This has resulted in the Electronic Trade Documents Bill which is already making its way through parliament.
Much of world trade is underpinned by English law - a legacy of the UK's historic role in trade. Not just across The Commonwealth, but for every buyer, seller, insurer, financier and intermediary using English law as a basis for contract law or handling trade documents. The Bill will have a disproportionately large and positive impact on global trade at a time when companies all over the world are facing unsustainably high trade costs whilst being forced to handle unnecessary paper documents.
The Bill will allow for trade documents in electronic form to be capable of being possessed as a matter of law, provided that they meet certain criteria which ensures that they can replicate the salient features of paper trade documents.
In order to qualify as an electronic trade document, a document in electronic form must contain the same information as would be required to be contained in the paper equivalent.
"Use" of a trade document in electronic form should comprise utilising or retaining the document to achieve a particular purpose. It should include causing something to happen (or preventing something from happening) to the document but exclude merely reading or viewing the document.
It is expected that the Bill will be approved by the middle of 2023 and we will keep you updated on progress.
Summary from UK Parliament:
The Electronic Trade Documents Bill would give certain electronic trade documents the "same legal treatment, effects and functionality" as their paper equivalent. The bill covers trade documents that must be capable of being possessed for them to have legal effect and function as intended. Under current law, only things that can be physically held are considered as being capable of being possessed. Therefore, UK law does not recognise the possibility of possessing electronic documents. The bill implements the Law Commission of England and Wales's recommendations that the law recognises that such trade documents can be possessed in electronic form.
Commonly used documents in the UK for the trade in or transport of goods the bill covers include:
It does not cover documents or instruments that come under the Uncertified Securities Regulations 2001. The new rules would require trade documents in electronic form to meet certain criteria designed to replicate the key features of paper trade documents.
The bill would allow businesses to choose to use electronic trade documents, but they would not be required to use them. It would also allow paper documents to be converted to electronic documents and electronic documents to be converted to paper ones.
The government has said the bill would "boost" the UK's international trade, reduce financial and environmental costs, and increase efficacy and security. The measures have been largely welcomed by the sector.
The Electronic Trade Documents Bill provides for certain digital trade documents to be put on the same legal footing as their paper counterparts. It implements the recommendations made by the Law Commission in March 2022.
The bill was introduced in the House of Lords by Lord Kamall (Conservative) on 12 October 2022. The government said it would schedule second reading when parliamentary time allowed.