The Electronic Trade Documents Bill will make international trade cheaper, faster and more secure
Not only will the Electronic Trade Documents Bill make trade faster, cheaper and greener, it is a model of how to legislate for tech through specific criteria. A blockchain bill that will stimulate blockchain development and adoption without ever mentioning blockchain.
The Electronic Trade Documents Bill, introduced in the House of Lords this month, will allow the digitisation of trade documents. A small sounding bill, it is nonetheless one that will have a colossal impact. This change will transform trade, an industry worth £1.3tn to the United Kingdom, but even more than that it will demonstrate the way in which the UK can be at the fore of ground-breaking tech enabling legislation.
New technologies such as AI, blockchain/distributed ledger technology (DLT), crypto, IoT, smart contracts and so much more are changing the way we do things. This 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.
If 50 per cent of the container shipping industry were to adopt electronic bills of lading, collective global savings would be in the region of £3bn
I imagine that it will be shocking to many of you to learn that in this digital age commercial trade documents – bills of lading, bills of exchange – are only legally valid on wet signed paper. Millions and millions of pieces of paper, endless hours of burdensome bureaucracy, delays, inefficiencies and significant environmental costs.
The problem stems from the fact that commercial trade documents 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. Making the law say that things that are intangible can be possess-able might have dangerous unintended consequences so it has been essential to make use of the ways in which certain technologies can imitate the paper documents and make that clear through specifying certain criteria.
This is key. The obvious technological solution to this conundrum is DLT or blockchain, but it is right that this bill does not specify 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.
It is incredibly helpful that the Electronic Trade Documents Bill has been drafted by the Law Commission. Is an elegant and succinct piece of legislation. 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 Digital Container Shipping Association (DCSA) estimates that if 50 per cent of the container shipping industry were to adopt electronic bills of lading, the collective global savings would be in the region of £3 billion.
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 to 12 per cent.
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 outstrips all other trade deals on the table. The Electronic Trade Documents Bill has the potential to be transformative, not just for the trade industry but ultimately for us all, for citizen and state.
Lord Holmes, Conservative peer.
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