In the wake of the commitment made by G7 digital and technology ministers to adopt electronic transferable records in trade transactions, the Law Commission of England and Wales has begun consulting on its proposals to make this a reality. These proposals outline the important areas that need to be addressed so that electronic trade documents may be “possessed” in the eyes of the law. This will make them true legal alternatives to paper documents in international trade in England and Wales. The commission is likely to publish recommendations and a draft bill by early 2022.
Why It is Important
From a functional perspective, there is little need to elaborate on the benefits of electronic documents in global trade, particularly against the backdrop of the pandemic. However, from a legal standpoint, at least in common law countries, there is a major hurdle with regard to “possession” of electronic documents.
This means that while some forms of electronic documents, such as electronic bills of lading, are already used today, the law does not recognize their “possession” as, according to common law, you cannot possess something that is intangible. This means that electronic documents and their related dealings fall under contractual law, which can be superseded by proprietary rights in the event of insolvency, for example.
Therefore, and because existing commercial law in England and Wales already works well, the Law Commission merely seeks to expand the definition of “possession”, rather than rewrite laws or bring in new ones. This will make for minimal disruption but maximal adoption of electronic transferable records.
Benefits of Truly Electronic Trade Documents
The main benefit of electronic transferable records, under an expanded notion of possession, will be that they will enjoy the same sense of legitimacy and validity as their paper counterparts do, effectively according to them the same status. This will further help to cement the idea of international paperless trade.
Furthermore, electronic documents make handling faster and simpler, improve global competitiveness amongst peers, reduce processing costs for both participants and law enforcement and provide better document tracking and streamlining of processes. What usually takes days can be accomplished in mere hours. Additionally, against the backdrop of the pandemic, paperless trade means less physical contact and the ability for trade-related services to continue uninhibited, being compatible even with a remote-work model.
