Businesses are being called upon to get ready for digital trade documentation or risk being left behind, following a new commitment made by G7 digital and technology ministers.
The G7 (or Group of Seven) is an organisation made up of the world's seven largest so-called advanced economies: Canada, France, Germany, Italy, Japan, the UK and the US.
Changes proposed will pave the way for greater adoption of electronic transferable records in international trade transactions, reports Global Trade Review.
G7 stamp
At a meeting last week, the G7 agreed a framework to promote the adoption of the UN’s Model Law on Electronic Transferable Records (MLETR), which will make the use of electronic documents easier.
Data from the Digital Container Shipping Association (DCSA) shows that currently only 0.1% of bills of lading are issued electronically. Roll out of e-documents has been hindered by the requirement in most jurisdictions for documents be presented in hard-copy format.
A joint statement from G7 minister said that the dominance of paper-based transactions were a source of cost, delay, inefficiency, fraud, error and environmental impact.
Efficiency savings
“It is our shared view that by enabling businesses to use electronic transferable records we will generate efficiencies and economic savings. This will strengthen the resilience of our global economic system and play a crucial role in trade recovery across the G7,” they said.
During the pandemic last year, the International Chamber of Commerce (ICC) called upon governments to enable an “immediate transition” to paperless trading. However, only a handful of countries, such as Bahrain and Singapore, have done so.
According to City AM, research shows that digitising transferrable documents in the UK alone will generate £25bn in new economic growth, boost SME trade by 25% by 2024, and free up £224bn in efficiency savings – £171bn of this coming from bills of lading alone.
‘Anachronism in the 21st century’
Marco Forgione, director general of the Institute of Export & International Trade, welcomed the news:
“It is an anachronism in the 21st century that we are still bound by 18th century requirements for trade documentation,” he said. “The G7 move is to be welcomed, particularly for the fast developing economies of Africa but also for UK trade as well there’s such a fantastic saving to be made on digitising documentation.”
As chief executive of the British Antique Dealers’ Association from 2015-19, Forgione lobbied government and Arts Council England to introduce digital export licences for art and antiques as a way of easing cross-border trade.
A new online system for art and antiques export licences is expected to launch in Autumn this year.
UK lead
UK culture secretary Oliver Dowden who hosted the virtual meeting, said the world’s leading economies should lead the way in this area, reported Business AM Live.
“Together we have agreed on a number of priorities in areas ranging from internet safety to digital competition to make sure the digital revolution is a democratic one that enhances global prosperity for all,” he said.
By October this year, G7 members have committed to map domestic legal barriers to the use of electronic records and establish actions to address them, as well as considering legal and regulatory issues, and establishing actions for co-operation.
With a large chunk of international trade and finance governed by common law structures, and the main two being English Law and New York Law, the UK could be one of the champions of digitisation, according to TXF News.
Law Commission consultation
The UK Law Commission has launched a consultation on its provisional proposals for law reform, considering three criteria that electronic trade documents would need to meet to be “possessed” in the eyes of the law:
The document is a trade document of the kind listed in draft legislation. These are bills of lading; bills of exchange; promissory notes; ships’ delivery orders; warehouse receipts; marine insurance policies; cargo insurance certificates, and warehouse receipts.
The electronic document is capable of exclusive control so that only one person (or group) has control of it at any one time.
The electronic document must be fully divested on transfer. If one person transfers it to another person, the first person must no longer be able to control the document.
According to ATEB News, many companies have spent the pandemic rethinking what signatures they really need.
It concludes that while there are some complex and/or statutory documents where a wet signature is required, much of the documentation around the advice process would qualify as ‘simple contracts’ able to be electronically signed.
Don’t ditch the ink
However, lawyer Pinsent Masons warns that the world is not ready to ditch wet signatures and go completely digital yet.
It says: “Electronic signatures should not be relied upon in all circumstances. Some statutory bodies, for example HM Revenue & Customs and the Land Registry, do not yet accept all documents signed electronically and there are complications around witnessing electronic signatures.”
Change is afoot though, warns Chris Southworth, secretary general of the ICC’s UK chapter, who said companies could get left behind if they didn’t act.
“Industry now have 12 to 18 months to prepare, because once those legal barriers are removed, the market is going to move extremely quickly because as the business case sets out, the economic driver is enormous,” he said.