Last reviewed 6 May 2021

The Law Commission is running a public consultation on provisional proposals to allow for electronic trade documents to have the same effect in law as their paper equivalents.

It has prepared a draft Bill which would implement the provisional proposals and would welcome views on this document as well as on the underlying policy.

The detailed consultation paper (nearly 200 pages in length) can be found at https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2021/04/Electronic-trade-documents-CP.pdf and the deadline for submitting comments is 30 July 2021.

With international trade worth £1.153 trillion to the UK, the process of moving goods across borders involves a range of actors including transportation, insurance, finance and logistics service providers.

One transaction can require between 10 and 20 paper documents, the Law Commission points out, and global container shipping alone is estimated to generate 28.5 billion paper documents a year.

Across so many documents, the potential positive impacts of using electronic trade documents — including significant financial and efficiency gains, and environmental benefits — should not be underestimated, it argues.

The Commission explains that many of the rules can be traced back to practices developed by merchants hundreds of years ago and are based on the idea that the trade documents can be physically held or “possessed”.

However, under English law, possession is only associated with tangible assets, and the law does not therefore recognise the possibility of possessing electronic documents. The Commission has therefore been asked by the Government to make recommendations for reform to allow for legal recognition of trade documents such as bills of lading and bills of exchange.

Proposals for reform

It is proposed that an electronic trade document should be “possessable” provided that:

  • it is a trade document of the kind listed in the draft legislation including: bills of lading; bills of exchange; promissory notes; ship’s delivery orders; warehouse receipts; marine insurance policies; cargo insurance certificates; and warehouse receipts

  • it is capable of exclusive control. That is, the electronic trade document must be on a system that ensures that only one person (or group) has control of the electronic document at any one time

  • it must be fully divested on transfer. If Person A transfers the electronic document to Person B, Person A must no longer be able to control the document.

A summary of the consultation document can be found at https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2021/04/6.7434_LC_Digital-assets-consultation-summary_web3.pdf.