THE ELECTRONIC TRADE DOCUMENTS ACT (ETDA) – THE FUTURE OF TRADE
I. Background
– The law in the United Kingdom did not recognize the possibility of possessing electronic documents.
– In fact, the Digital Container Shipping Association (“DCSA”) has estimated that 16 million original bills of lading were issued by ocean carriers in 2020, and that more than 99% of these were in paper form.
– According to this situation, the Department for Digital, Culture, Media and Sport (DCMS) asked the Law Commission to make recommendations to solve the problems caused by the law’s approach to the “possession” and transfer of trade documents in electronic form. The recommendations allow the use of electronic versions of certain trade documents so that international trade could be more fully digitalized, saving significant costs and providing many benefits that will be reflected in the efficiency of the transactions.
– The Electronic Trade Documents Bill was first introduced in the House of Lords on 12 October 2022.
– On 20 July 2023, the Electronic Trade Documents Bill received the status of law with Royal Assent.
II. Summary of ETDA contents
The ETDA contains only seven sections:
1. Defining “Paper Trade Documents”: provides a clear definition of “paper trade documents” and setting the stage for the types of documents covered by the ETDA. Also, its gives examples of documents commonly used.
2. Defining “Electronic Trade Documents”: introduces the concept of an “electronic trade document” and the criteria and framework for digital possession under the ETDA. These reflect the “gateway criteria” set out in the Law Commission report.
3. Possession, Endorsement and Effect of Electronic Trade Documents: equates the legal status of “electronic trade documents”, guaranteeing the same legal effects as those derived from paper trade documents.
4. Change of Medium or Form: allows for the conversion of paper trade documents into “electronic trade documents” and vice versa, enabling a seamless transition between formats.
5. Opt-out Provision: introduces an “opt-out” clause, which exempts certain electronic trade document from the provisions contained in clauses three and four
6. Consequential Amendments: amends the Bills of Exchange Act 1882 and repeals certain provisions of the Carriage of Goods by Sea Act 1992 in order to aligns the ETDA with current legislation.
7. Territorial Extent, Commencement Date, and Short Title: provides the territorial extent of the ETDA, the commencement date and its short title.
III. Importance of the ETD
The ETDA provides that a computer document may be substituted for a paper document provided that a reliable system is used to ensure that it can be identified, protected from alteration or unauthorized copying, and that it is capable of control by one person to the exclusion of others, so that that power of control can be transferred to another person who obtains a similar power.
As such, an electronic document that satisfies these criteria has the same effect as a written document, can be owned, endorsed and delivered, and anything done in relation to it has the same effect as the equivalent action in respect of a paper document.
According to the flexibility of choosing between the physical and electronic documents, the commission has suggested two requirements for a valid change or form. The first one, is about the existence of a statement in the new document, pointing out that the document has been converted; and the second one, is about the compliance of any contractual or other requirements relating to the conversion of the document.
Comments
The approval of the ETDA brings several benefits, such as reduced operating costs, increased productivity, as well as facilitating international trade. It will also require that insurance, international trade or insurance or re- insurance companies should have to train their employees in the use of the electronic bills of lading.
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