As the shipping industry gradually moves towards adopting electronic trade documents, there is a significant risk that the legal mechanisms facilitating this change will add further challenges, despite the best of intentions. As the UK Government consults on the proposed legal reform, we consider some of the practical issues that may arise as technological systems compel a renewed approach.
On 12 October 2022, the Department for Digital, Culture, Media and Sport introduced the Electronic Trade Documents Bill (the Bill) to the House of Lords.
The Bill concerns electronic documents used in trade and trade finance that are not currently considered capable of being (physically) possessed under English law, such as electronic bills of lading. The aim of the Bill is to “put electronic trade documents on the same legal footing as paper documents, removing the need for wasteful paperwork and needless bureaucracy”.
As part of the legislative process, the Special Public Bill Committee on the Electronic Trade Documents Bill launched a call for evidence, asking interested parties to provide their views on the proposed reforms.
Kennedys responded to the call for evidence, providing suggestions and comment drawn from our marine expertise.
Our experts highlighted that certain elements of the current draft require further consideration and refinement before legislation is passed. In particular, we encouraged the Committee to:
- Incorporate clear definitions of ‘possession’ and 'exclusive control'.
- Expand the definition of an electronic trade document to account for unauthorised transfers.
- Clarify the definition of a 'reliable system'.
- Give more consideration to how disruptive technologies may impact electronic trade documents in the future.
- Provide for a standardised basic minimum qualification, level of responsibility or training for an operator of the electronic trade document.
Partner Chris Chatfield commented that "Paper documents have long had their limitations. As carriage times reduce, we increasingly see the goods arrive at destination before the documents needed to obtain release. Furthermore, the shipping industry is coming under increased pressure to reduce its environmental impact and the continued use of paper documents is one aspect under scrutiny.
If the UK is to remain a significant influence in the modern shipping industry, it is important that it embraces emerging technologies and that the law develops accordingly. However, it is equally important that the law continues to offer the support and protection which parties to a contract of carriage could expect from paper documents".
Throughout January, the Committee considered the written evidence submitted – including Kennedys’ response - and met three times to take oral evidence. The Committee will now consider all the evidence presented before reporting back to the House of Lords, to include any proposed amendments to the Bill. We will continue to monitor and report on any significant developments.
The use of electronic trade documents is currently hindered by the fact that they are not recognised under the existing legal framework of many countries. They are, however, in existence and we have seen additional contracts presented in an attempt to bypass the legal position. In light of this, we welcome this proposed legislation, and agree that reform is necessary.
However, there are many practical implications which we consider require further examination before this draft legislation becomes law. For example, the courts have previously been reluctant to find that handing over the security information (such as a PIN needed to access containers within secure port areas) is the equivalent of handing over the goods (MSC Shipping SA v Glencore International AG ). This proposed legislation would need to consider the courts’ approach in such situations.
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