Legislative reform: electronic trade documents in England and Wales
The Law Commission has proposed legislative reform to recognise electronic trade documents to have the same legal effects as their paper equivalents.
On 30 April 2021, the Law Commission of England and Wales published a consultation paper (“the Consultation”) on a proposed legislative reform to recognise electronic trade documents to have the same legal effects as their paper equivalents. A summary of the Consultation prepared by the Law Commission can be accessed here. This is significant as it will provide a picture of what other jurisdictions might adopt on their own ambitions for the digitalisation of trade.
As opposed to paper trade documents, electronic trade documents are intangibles and thus cannot be possessed. They have limited legal effect under the current legal regime. In the age of digitalisation, the present position of the law is unsatisfactory as it impedes our trade and trade finance industry from transforming towards paperless.
The proposed reform seeks to legally recognise electronic trade documents if certain requirements are met. The scope of the reform focuses on different categories of trade documents, including but not limited to: (i) bills of exchange; (ii) promissory notes; and (iii) bills of lading.
With the help of distributed ledger technology, electronic trade documents would share the same properties as physical pieces of paper, such as independent existence, being necessarily divestible and capable of exclusive control. They would become “possessable” and share those characteristics of documentary intangibles, eventually facilitating the transition from paper documentation to electronic documentation and the digitalisation of trade.
International trade consumes 4 trillion paper documents per year. Digitalisation of trade and this reform could lower operation costs for trade participants and result in environmental benefits.
Many of the trade associations will be responding to the Consultation. However, we know that not all traders, producers, financiers or trade platforms are members of those bodies.
Therefore, Simmons & Simmons is currently preparing a response to the Consultation on behalf of our clients. The Consultation will close on 30 July 2021.
If you would like to feed into our responses, please do not hesitate to contact us.
Please get in touch and be heard in this important development for the international trade and trade finance sector.
