The Electronic Trade Documents Bill is one of the most important bills you have never heard of. Not only will this bill make trade faster, cheaper, and greener, it is an English law model of how to legislate for technology through specific criteria. A blockchain
bill that will stimulate blockchain development and adoption without ever mentioning blockchain.
Earlier this month in the House of Lords, the Government introduced an incredibly important piece of legislation. The Electronic Trade Documents Bill will allow the digitisation of trade documents. Despite being a small sounding bill, it is nonetheless one
that will have a colossal impact. This change will transform trade, an industry worth £1.3 trillion to the UK; even more than that it will demonstrate the way in which the UK can be at the front of ground-breaking tech-enabling legislation.
We live in disruptive and uncertain times. New technologies such as AI, blockchain/distributed ledger technology (DLT), crypto, IoT, smart contracts, and so much more are changing the way we operate. This tech revolution, the fourth industrial revolution,
is well underway but the challenges to delivering the potentially (genuinely world-beating) value are significant. I have long called on the Government to act to make the most of the opportunity, to seize the initiative, to invest and innovate, to lead, and
ultimately to ensure this potentially infinite value is realised for both citizen and state not merely a small number of global, corporate monoliths.
One of the most significant problems we all became suddenly and powerfully aware of during the pandemic was the fragile nature of our current global supply chains. Add this to the post-Brexit trade challenge or (depending on your perspective) opportunity,
though whatever your perspective, we must make this an opportunity; there is an absolute need to improve the efficiency, cost, security, reliability, and sustainability of getting our food and goods across borders and into our businesses, schools, hospitals,
and homes.
I imagine that it will be shocking to many of you to learn that in this digital age - where Amazon provides almost anything you want, to your door, the next day, at a single swipe of your finger, with payment information integrated to an app on your mobile
phone, where business meetings are conducted online, where we can bank online, learn online, even meet our doctor online, the list goes on - that while all this is possible, commercial trade documents currently have to be paper. Millions and millions of pieces
of paper, endless hours of burdensome bureaucracy, delays, inefficiencies, and significant environmental costs.
It seems incredible that we cannot digitise this process, that current trade documents – such as bills of lading and exchange – rely on physical possession and, in order to be legal, have to be physically transferred and on paper. So, despite having the
technology available to us and technological solutions that could offer significant benefits, we are stuck. It is not currently legal to digitise trade documents. Practically possible but legally not. It is a ridiculous situation, but the excellent news is
that we have a solution.
The Electronic Trade Documents Bill, drafted by the Law Commission, is an elegant and succinct piece of legislation. It has been drafted by the most distinguished
legal experts and is facilitative and permissive. You will not be forced to use digital documents, but if you want and are able to use digital trade documents then they will be possible on the same legal basis as paper trade documents. It will instantly be
easier, cheaper, faster, and more secure for businesses to trade internationally.
The main benefits of the Bill will be:
- increasing efficiency and lowering trade administration costs because processing electronic documents is faster and cheaper than paper equivalents,
- increasing the security and compliance of trade by utilising the transparency and traceability benefits electronic documents offer, and
- realising environmental benefits from reduced use of paper and courier emissions.
Putting those benefits into numbers, the Digital Container Shipping Association (DCSA) estimates that if 50%of the container shipping industry were to adopt electronic bills of lading, the collective global savings would be in the region of £3 billion. Most
respondents to a Law Commission consultation expect savings of at least 5% on transaction costs.
In terms of efficiency, according to CargoX, as cited by Trade Finance Global, transferring a paper-based trade document can take 7-10 days, whereas processing the document electronically will reduce this to as short a period as 20 seconds. Estimates from
the World Economic Forum when considering the environmental impact is that this has the potential to reduce global carbon emissions from logistics by as much as 10-12%.
Unsurprisingly, the rest of the world are also wrestling with this issue. In 2017, the UN published a Model Law on Electronic Transferable Records (MLETR), and so far some 7 or 8 jurisdictions world-wide have adopted it in full - Singapore at the forefront
- but dozens of others have it under consideration.
The G7 countries have agreed to cooperate on its wider adoption, and of those Germany and the UK are farthest advanced on it. English law is respected around the world, and we have an incredible opportunity with this Bill to be the first G7 country to pass
this legislation and consolidate that well respected position. English law could continue to be the basis for international trade law for decades to come. The world is watching.
I am a huge supporter of this Bill and held a roundtable meeting in Parliament with key stakeholders to raise awareness and answer any questions. We were delighted to hear from Oliver Tones who is the policy official from DCMS leading on the Bill, Prof Sarah
Green – Law Commissioner who has led on the drafting and public consultation on the Bill, Chris Southworth – General Secretary of the International Chambers of Commerce UK who has been a major advocate for digitizing trade processes for some time, Justin Szymborski-
an importer of fresh fruit who has been involved in a digital pilot with HMRC/Cabinet Office and understands the benefits to his business and future supply chain management, and Craig Walton – Digital Lead for Tees Valley Freeport/Combined Authority.
Our speakers all highlighted that this Bill is desperately needed and would bring huge benefits. Chris Southworth pointed out that because commercial documents have to be paper, at the moment, less than 1% of trade documents are digital. Mango importer Justin
told us that he could have a digital copy of paperwork available when a boat leaves Brazil, but it can take 14 days to get wet signature papers. Oliver confirmed that the Bill was universally supported from a policy perspective and completely uncontroversial
in that it would not mandate the use of e-documents but merely enable their use.
Professor Green gave an excellent explanation of the legal challenge, she explained that commercial trade documents (documents of title, bills of lading) are not documents setting out contract information but an actual physical manifestation of goods. Making
that digital has been much harder than merely permitting ‘digital documents’. Ratifying the law that makes things that are intangible possessable might have dangerous unintended consequences, so it has been essential to make use of the ways in which particular
technologies can imitate the paper documents and make that absolutely clear through specifying certain criteria.
The obvious technology that can serve this purpose is DLT – a technology I have been advocating the exploration of since my 2017 paper, Distributed
Ledger Technologies for Public Good: leadership, collaboration and innovation, but it is absolutely correct that this Bill does not dictate any particular technology, merely the necessary criteria. These criteria include ensuring that an electronic
document is capable of being subject to exclusive control (only one person, or persons acting jointly, can exercise control over it at any one time); and that once transferred the previous holder should no longer be able to exercise control over the document.
We could be the first G7 country to pass this brilliant, enabling, piece of legislation that will make international trade easier, cheaper, faster, and more secure. The scale of the benefit dwarves all other trade deals on the table and as Craig from Tees
Valley Free port said during the meeting, “the current situation is madness.” The Electronic Trade Documents Bill has the potential to be absolutely transformative not just for the trade industry but ultimately for us all; for citizen and state.