Electronic Trade Documents Bill: briefing note

Update:

This Bill received Royal Assent on 20 July 2023. Please click here to read our analysis of this new legislation.

Electronic Trade Documents Bill

12 May 2023

The Electronic Trade Documents Bill concerns electronic documents used in trade and trade finance that are not considered capable of being (physically) possessed under English law. The aim of the Bill is “to have the same legal recognition and functionality as their paper counterparts”.

Who's affected

The Bill intends to make the process of transferring goods from one party to another more efficient and cost-effective for the shipping industry. This will, in turn, indirectly impact businesses whose operations largely depend on maritime transport.

Purpose of the Bill

The main purpose of the Bill is to provide the shipping industry with the legal mechanism to enable the use of electronic trade documents without the need to engage in complex and often operationally burdensome processes. The Bill also aims to facilitate:

A reduction of costs associated with the use of paper trade documents.
A shift to a more environmentally friendly system that does not rely on paper documents.
The development of digital products and services within the shipping industry, with a view to stimulate business growth.
Increased security and transparency in shipping documentation.

Legislators have taken a different, but considered, approach to the Electronic Trade Documents Bill compared to the Model Law on Electronic Transferable Records drafted by UNCITRAL. It is intended to recognise electronic bills but then will look to the English Courts to develop the law on them. After many years and many attempts, whilst it will continue to face challenges, now does seem a time when electronic bills of lading are likely to become mainstream.

Michael Biltoo, Partner, London

Key provisions

The Bill includes:

Definitions of paper and electronic trade documents.
A provision confirming that an electronic trade document can be physically possessed.
Details on how an electronic trade document can be converted into a paper trade document and vice versa.
A requirement for a reliable system to be used to manage electronic trade documents.

What's not in the Bill

The Bill does not clarify what exactly constitutes possession.
Due to being ‘technology neutral’, the Bill does not define reliable systems. It does, however, provide guidance on what should be considered when determining whether a system is reliable.
A standardised basic minimum qualification, level of responsibility or training for an operator of an electronic trade document are not discussed in the Bill.

Timeline

In 2021, the Law Commission consulted on the legal status of electronic trade documents and how it could be reformed. The Commission’s recommendations were published in March 2022 and the Electronic Trade Documents Bill was subsequently announced in the Queen’s Speech in May 2022. It was introduced to the House of Lords on 12 October 2022 and is currently awaiting consideration by the lower house in a Second Reading Committee (an approach typically only applied to non-controversial draft legislation), due to take place on Monday 12 June 2023. We expect this Bill to make swift progress through Parliament and receive Royal Assent in the current parliamentary session.

Kennedys responded to the call for evidence issued by the Special Public Bill Committee on the Electronic Trade Documents Bill. A summary of our response can be found here.

Electronic Trade Documents Bill: briefing note