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The dawn of a new trade era with the UK Electronic Trade Documents Act

One of the most transformative laws in recent history came into force today the 20th of September 2023 in the United Kingdom after a 20-year wait..

The Electronic Trade Documents Act, a game-changing regulation that accords electronic trade documents the same legal weight and rights as its paper counterpart, possesses immense potential..

Its implications are vast, not just in reshaping international trade but also in pioneering the use of advanced technologies with the usage of digital documentation said to have a potential to curtail carbon emissions from logistics by a commendable 10-12% as indicated by the World Economic Forum..

With this law coming into effect, there is no legal requirement to handle commercial trade documents such as bills of lading, bills of exchange, promissory notes, warehouse receipts, and marine insurance documents only on paper and can also be handled in electronic format..

English law is often the favored legal regime adopted by ship owners, charterers, shipping lines and customers to govern international commercial contracts..

With this law coming into force, any company adopting English Law worldwide can remove paper-based trade documentation from their processes and use electronic documents which helps in removing much of the pain and red tap associated with paper documents..

As per Chris Southworth of ICC UK, paper-based processes which include 80% of all bills of lading and 60% of global trade finance, hinder economic growth, especially for SMEs who feel the pain the most..

Lord Chris Holmes, who was instrumental in this act becoming law says the Special Public Bill Committee, encountered some pressing challenges in ensuring that the electronic documents have the same status in law as its paper version as documents such as bills of lading relied on physical possession to be considered as a document of title..

The heart of the challenge lay in conferring upon electronic trade documents the same legal sanctity as traditional paper ones.. How does one emulate the tangibility and possession dynamics inherent to physical documents in a digital realm?

The solution arrived at was that the committee had to set out certain criteria that must be met in order for an electronic document to be an ‘electronic trade document’..

This criterion has been set out in Clause 2 of the law and it states that an ‘electronic trade document’:

  • must be identifiable so that it can be distinguishable from any copies
  • must retain its integrity (not be altered without the necessary authority
  • must not be possible to have more than one person exercise control over it at any one time
  • must be capable of being uniquely linked to that person and
    must be fully divested on transfer

This groundbreaking Act rejuvenates an 1882 statute, placing English common law – which governs a whopping 80% of global trade documents – at the forefront of this digital evolution..

This Act is based on the Model Law on Electronic Transfer Records (MLETR) passed in 2017 by the UN International Trade Group..

While many countries globally have accepted the principle of the MLETR, the UK is now only the 8th state globally to adopt it into Law following Bahrain (2018), Belize (2021), Kiribati (2021), Papua New Guinea (2022), Paraguay (2021), Singapore (2021), United Arab Emirates, Abu Dhabi Global Market (2021)..

As per Lord Holmes, Germany is expected to have full legislation later this year and France by 2024/2025 with China and USA working on similar time frames..

Lord Holmes is hopeful that being the first G7 country to adopt the MLETR, UK’s Electronic Trade Documents Act could become a model law for how to adopt the UNCITRAL model law..


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Hariesh Manaadiar
Hariesh Manaadiarhttps://www.shippingandfreightresource.com
I am Hariesh Manaadiar, the Founder of Shipping and Freight Resource.. I have been in the dynamic shipping and freight industry for over three decades and have worked in several sectors.. I share my experiences and knowledge of the industry through this blog for those looking for help in the industry.. Stay subscribed for more free useful content about shipping, freight, maritime, logistics, supply chain and trade..


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