Electronic Trade Documents Act 2023 comes into force
The Electronic Trade Documents Act 2023 took effect on 20th September.
The Act aims to facilitate the legal recognition of documents widely used in trade finance, in electronic form, so that they can be used in the same way as paper counterparts, and thus should greatly facilitate international trade transactions, including trade finance, import-export transactions, shipping and international maritime trade. The result is expected to be significant cost savings, reduced transaction processing time, and reduce human error and fraud.
The Act covers "bearer" trade documents where possession is required “as a matter of law or commercial custom, usage or practice for a person to claim performance of an obligation”, setting out a non-exhaustive list. These include promissory notes, bills of exchange, bills of lading, and other documents such as ship’s delivery orders, warehouse receipts, mate’s receipts, marine insurance policies, and cargo insurance certificates. These documents entitle the bearer to claim delivery of goods or payment of a sum of money while it is in possession of the document.
The Act grants the same legal functions to electronic documents containing the same information as their paper equivalents, provided that a ‘reliable system’ is used to: identify and distinguish the document from any copies; protect the document against unauthorised alteration; prevent the document being controlled by more than one person at a time – the system must be sufficiently “secure” – with “control” being exercised when the person uses, transfers or disposes of the document; be accessible so as to allow the person who can exercise control over the document to demonstrate this; and ensure that the document is fully divested on transfer, i.e. the transferee is granted exclusive control.
The Act is expected to enable the wider adoption of ‘distributed ledger technology’ or blockchain-based systems meeting these reliability standards, to underpin the advantages conferred by the Act with the necessary systems to facilitate the real-world use of electronic trade documents.