The Electronic Trade Documents Act – Why it matters and what it means for the use of electronic Bills of Lading (eB/Ls)
By Marina Comninos, Co-Head, ICE Digital Trade
17 years ago, Alex Goulandris, founder and Co-Head of ICE Digital Trade, asked me to join his then start-up to develop a legal framework for electronic Bills of Lading (eB/Ls). As a maritime lawyer, I had often wondered why the international trade community was woefully behind other industries in digitising, and here was my chance to find out.
Suffice to say, I did not anticipate that we would still be talking about this topic almost two decades later… We developed the ICE Digital Trade legal framework, which contractually ensures that electronic Bills of Lading are the legal equivalent to paper. Over the years, that contractual framework received broad acceptance, and the bulker industry, in particular, has been using these eB/Ls at scale for well over a decade. Some trade routes are at 70+% digital, recognising that eB/Ls are the answer to the difficulties, costs and inefficiencies associated with paper B/Ls.
While the contractual framework has proven valuable, a legislative landscape enabling trade digitisation was bound to follow. The foundations were set in 2017, when UNCITRAL published the Model Law on Electronic Transferable Records (MLETR). I participated in the Working Group tasked with developing the Model Law and we were hoping for a quick uptake given the pace of digitisation in other sectors. Bahrain was the first to embrace the model law in 2018, however, adoption only began to accelerate post-COVID in 2021 and 2022 when 6 further nations, most notably Singapore, implemented versions of the MLETR.
On 20 July 2023 a huge milestone towards trade digitisation was achieved; the UK’s Electronic Trade Documents Bill, which is influenced by the Model Law, received Royal Assent, officially becoming the Electronic Trade Documents Act (ETDA). It is rumoured that France and Germany are soon to follow, and the G7 have publicly declared that they will adopt legislation recognising electronic Bills of Lading.
It is noteworthy that the State of New York recognised eB/Ls as far back as 2001. However, the nature of international trade is such that one country recognising something is not sufficient – you need a coalition!
So, what does this newfound energy to digitise mean for trade and the use of eB/Ls? Addressing some of the most common questions we get:
Will contractual frameworks disappear? Not overnight. The contractual frameworks have served the industry well the last 10+ years, and they have an ongoing role to play in the transition from a private law (contractual) system to a public law (statutory recognition) system. While the number of countries which have adopted MLETR-like legislation is limited, trust in local law bills will need to be built up over time, by showing successful adoption and scalable use in pre-determined trade lanes (just like we did when we first introduced eB/Ls which were governed by contractual frameworks).
So, how will they interact? Initially, ‘local law’ bills (i.e. ones which are valid because they are subject to a law which recognises eB/Ls) will need to run in parallel to ones created under one of the contractual frameworks (let’s call them ‘contractual bills’). This will pose some challenges to the industry, as it adds to the complexity of the change management burden. But given the effort over many years to lobby governments to change the law to recognise eB/Ls, the opportunity is too great to miss. Solution providers must find ways to lighten the change management burden on users in order to capitalize on the changing legislative landscape.
When will local laws completely replace contractual frameworks? When a ‘sufficient’ number of countries have enacted legislation recognising eB/Ls, local law bills will become the de facto solution for electronic transferable records.
What is sufficient? Lawyers do not love guess work, but I think there are some markers we can track to see progress in enactment of legislation recognising eB/Ls:
- Bills of lading tend to be subject to the laws of a handful of states: likely 80-90% of bulker bills are governed by UK law (via a UK law governed charterparty), as are approx. 40-50% of liner bills. Other relevant countries include: US, Singapore, Germany, France, China, Korea and Taiwan.
- If we are to leverage laws recognising eB/Ls we will, however, need to amend existing practice by including a law and jurisdiction clause in bulker bills of lading themselves, rather than relying on a cross-reference to a charterparty agreement.
- Countries where most trade is financed, such as the UK, US, France, the Netherlands, Germany, Switzerland, Singapore, Hong Kong, and the UAE are also relevant, as lenders will want to ensure that their security is valid under the laws governing the debt facility.
- Key maritime or trading countries, specifically the US, China, India, Japan, Korea, Australia, Brazil will also be critical in giving the international trade community comfort that there is broad acceptability of eB/Ls at a local law level.
What are next steps for English and Singapore law governed eB/Ls? The ETDA, similar to the Model Law, and its enactment in Singapore, all require that the system which manages the eB/L lifecycle is a ‘reliable’ system. The industry focus is gradually shifting to consider standards the international trade community can implement to establish ‘reliability’ of our systems, such that the law will recognize an eB/L issued by these systems. ICC UK, with the ICC Centre for Digital Trade & Innovation (C4DTI), have launched a consultation with a broad cross-section of industry participants to consider appropriate standards. Updates are expected on this by year end, so watch this space closely.
What can you do to help progress the digital transformation for eB/Ls? Keep lobbying your government to enact the Model Law, or a piece of legislation influenced by the Model Law. If you cannot lobby government, join your local ICC team, and encourage them to lobby your government. The more the merrier in this space, so we cannot stop pushing for change.