Policy & Compliance
Electronic Trade Documents Act 2023 (ETDA) to become law
The birth of a trading system fi t for purpose in the 21st century?
T he Electronic Trade come into force on 20 September as the Electronic Trade Documents Act (ETDA) 2023 (scan the QR code at the end of this article). It is one of the most signi fi cant pieces of trade law seen in decades and will enable 80% of bills of lading, 60% of global trade fi nance, marine insurance, shipping and other speci fi ed documents to be delivered digitally. Every trader transacting business under English law will be able to remove paper and transition to a digital trading future. Documents Bill was signed into law in July 2023 and will Advocates of the new law argue that it will start the much needed process to make trade cheaper, faster, simpler and more sustainable, and ensure the trading system is fit for purpose for the 21st century. The interesting point will be how to take the law and translate it into practical policies to make it work in practice. As an industry, trade has been resistant to change with paper documents still commonplace and certain initiatives such as IATA’s E-freight programme struggling to achieve wide adoption. Just because business can do something does not mean that it will do that thing. The Act in summary In summary, the new Act will allow certain electronic documents used in international trade and trade finance to have the same legal standing as a paper document. Currently in English Law such documents are not considered capable of being (physically) possessed in order to enforce rights such as the payment of sums of money or delivery of goods on board a vessel or in a warehouse. If business embraces the Act, there will be significant changes for
trade and the financial services as nearly all documents that are currently in paper form could be transferred into an electronic format. It is argued that this will improve the speed of exchange and the security of all documents used in international trade. This process will require a move to approved and enforceable electronic documentation. The ETDA will recognise the following documents in an electronic format: • Bills of exchange and promissory notes, • Bills of lading and ship’s delivery orders, • Warehouse receipts and mate’s receipts, • Marine insurance policies and certain insurance certificates. Businesses will need to utilise a ‘reliable system’ that ensures only one person at a time has exclusive control over the relevant electronic record of that trade document. It is envisaged that under the legislation: • Electronic trade documents will become capable of ‘possession’, with the same legal recognition and function as their paper
equivalents. • Security will be improved, anti- fraud measures enhanced with concerns around the transferability of ownership of documents being addressed via the implementation of a ‘reliable system’. • The reduction in trade documents to travel with the freight will reduce the time taken to physically exchange documents. • The UK will be seen as a leader in the move to digitise trade documents. Possible time lag However, there must be a strong possibility that change will take time, because there will inevitably be a lag between the law taking effect (due to the need to raise awareness) and the introduction of systems that will allow exchange of data, etc. Also, this legislation will not impact all trade lanes which, especially in the early days of this Act’s life, will discourage some
“ Advocates of the new law argue that it will start the fi re of a much needed process to make trade cheaper, faster, simpler and more sustainable
from exploring the use of this digital technology.
8 | September 2023
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