UK Officially Implements Electronic Trade Documents Act
Today is the day! On September 20, 2023, a significant law came into effect in the United Kingdom after a 20-year wait, the Electronic Trade Documents Act. This law is a game-changer because it gives electronic trade documents the same legal status as paper ones, opening up many possibilities.
With this law in place, businesses are no longer required to use paper for trade documents like bills of lading, bills of exchange, promissory notes, warehouse receipts, and marine insurance documents. They can now use electronic versions, which is more in line with modern practices.
Many businesses worldwide prefer English law for international contracts involving ships, charterers, shipping lines, and customers. With this law, these companies can say goodbye to paper documents and switch to electronic ones, which makes their processes smoother and less bureaucratic.
Chris Southworth of ICC UK points out that paper-based processes, which make up 80% of all bills of lading and 60% of global trade finance, have been holding back economic growth, especially for small and medium-sized enterprises (SMEs). The main challenge was to give electronic trade documents the same legal status as paper ones, even though they don’t have a physical form.
To solve this, the law established some rules for what qualifies as an “electronic trade document.” According to Clause 2 of the law, an electronic trade document must be identifiable, maintain its integrity without unauthorized changes, prevent multiple people from controlling it at the same time, be uniquely linked to an individual, and fully transfer when passed on.
This groundbreaking Act updates an 1882 law and puts English common law, which covers 80% of global trade documents, at the forefront of the digital age in trade.
This Act is based on the Model Law on Electronic Transfer Records (MLETR), which the UN International Trade Group passed in 2017. The UK is now the 8th country to adopt this principle into law, following in the footsteps of Bahrain (2018), Belize (2021), Kiribati (2021), Papua New Guinea (2022), Paraguay (2021), and Singapore (2021). Germany is expected to do the same later this year, with France likely following by 2024/2025, while China and the USA are also working on similar timelines. This shift marks a significant change in how global trade operates.
