The Electronic Trade Documents Act (ETDA) takes effect today, 20 September 2023.
Implementing detailed recommendations made by the Law Commission of England and Wales, the new law paves the way for the greater digitalisation of trade procedures by giving digital versions of key trade documents – including bills of lading – the same legal recognition as hard-copy versions. The aim is to facilitate the legal recognition of documents widely used in trade finance, in electronic form, so that they can be used in the same way as their paper counterparts.
The changes are expected to update outdated legacy trade processes and facilitate improved international trade transactions, including trade finance, import-export transactions, shipping and international maritime trade.
The law is not mandatory and there is no obligation to use electronic trade document. However, in light of the efficiencies and savings expected from adopting digital procedures, the Act could lead to £1.1bn of savings for businesses over the next decade, according to technology and digital economy minister Paul Scully.
The advantages of electronic trade documents over paper are expected to make international commerce easier, cheaper, quicker, and more secure by mitigating the risk of human error and fraud.
The Act covers trade documents where possession is required “as a matter of law or commercial custom, usage or practice for a person to claim performance of an obligation”, deliberately setting out a non-exhaustive list of such documents. These include promissory notes, bills of exchange, bills of lading, and other documents such as ship’s delivery orders, warehouse receipts, mate’s receipts, marine insurance policies, and cargo insurance certificates. These documents entitle the bearer to claim delivery of goods or payment of a sum of money while it is in possession of the document.
The Act sets out criteria that a trade document must meet to qualify as an “electronic trade document”, without mentioning or specifying any one technology in particular. Under Clause 2, an electronic trade document must use a “reliable system” 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 any 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 ETDA incorporates the 2017 UN Model Law on Electronic Transferable Records (MLETR), which to date has been adopted by a handful of jurisdictions, including Singapore. While many have it under consideration, the UK has become the first G7 nation to pass the legislation.