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The main problem the Law Commission finds with the current system is the sheer volume of paper produced through trade documents. It is estimated that the international trade industry generates four billion paper documents per year.
Despite the obvious environmental advantages of moving to an electronic system, the Law Commission also suggests that this reform could lead to significant cost savings and efficiencies, as well as improving information management and security.
Under the current law, trade documents (such as bills of lading and bills of exchange) carry with them a number of legal rights and obligations, for example they:
Due to what these documents represent, they are subject to more substantial protections and remedies than normal paper documents.
Furthermore, English law currently provides that paper documents are capable of ‘possession’, meaning that they are subject to a number of legal rights and remedies, such as being subject to bailment or a lien.
However, the law does not currently recognise electronic documents as being capable of ‘possession’ and as a result, are not subject to the same legal rights and remedies.
Therefore, the Law Commission has proposed that the way electronic documents are treated legally must be reformed, so that they are subject to the same rights and remedies as their paper counterparts.
The Law Commission has suggested seven criteria that must be met by electronic trade documents to enable them to be awarded the same rights and remedies as their paper equivalent, these criteria are:
There are a number of difficulties around digitising trade documents, and the Law Commission is producing a further report which focusses on the barriers that this reform may face in the context of private international law, which will be available mid-2022.
The Law Commission’s report and draft legislation is available to read here.
If you have any questions around the proposed reform, or any other commercial legal issues, our highly experienced Commercial team will be happy to help. Please contact Haroon Younis on 01332 226 466 or fill in the form below.
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