Since the UK formally legalised the use of electronic trade documents last year, trade digitalisation experts have puzzled over what makes a digital trade platform a “reliable system” in the eyes of the law.

Last month, the market received the closest thing it has so far to an answer, when the Digital Standards Initiative (DSI) of the International Chamber of Commerce distributed a draft model for assessing whether or not a digital trade system is reliable.

But it is unclear yet if the DSI’s model can form the basis of a globally recognised system for assessing the reliability of digital trade platforms, or if divergent criteria and assessment methods will emerge in different countries, potentially creating headaches for platforms that need to be able to operate internationally.

The UK’s Electronic Trade Documents Act (ETDA) requires a “reliable system” to be used for handling electronic trade documents, but does not provide detailed criteria for what constitutes reliability.

Similarly, the UN Model Law on Electronic Trade Records on which the ETDA and similar legislation is based, also calls for the use of a “reliable method” to ensure the integrity of digital documents.

The terminology applies to digital trade platforms that are used by trading companies, shipping providers and financial institutions to carry out trade transactions using electronic versions of documents such as bills of lading and bills of exchange.

The DSI’s draft framework, which was presented to platforms on April 22, takes the form of a lengthy questionnaire on the security and resilience of digital trade platforms, such as how they store and protect data.

“Our goal is to work with industry – both the platforms and the potential users – to develop an assessment framework that is credible and will help digital trade to take root globally,” says DSI managing director Pamela Mar.

The DSI is currently soliciting feedback from the platforms, and then plans to approach the potential users of a reliability credential.

“We think that a recognised certification could be useful, but at the same time we are conscious that a full-blown certification scheme might be premature,” Mar tells GTR. “So we are taking a wait-and-see approach. In the meantime, we hope that the framework as developed will provide guidance to platforms and systems seeking to enter the market.”

A global certification scheme could see one central body giving a stamp of approval to digital trade platforms. If globally recognised, this option would ensure that platforms can operate seamlessly in any country, but it may also come with steep costs.

The DSI developed the draft model alongside the Digital Governance Council, which assesses compliance with the Canadian digital governance standards.

“I think the DSI is the right party to drive this,” says Patrik Zekkar, chief executive of digital trade platform Enigio. “I think driving it on a global basis definitely makes sense, because trade is global.”

“At the end of the day, there needs to be an appropriate assessment or a certification,” Zekkar tells GTR. “It needs to be an authorised certification body.”

The UK ETDA stipulates that a court can take into account “the provisions of any voluntary scheme or industry standard that apply in relation to the system”, when determining whether a system is “reliable”.

Bojan Čekrlić, chief executive of CargoX, says global fragmentation of criteria for reliable systems would further set back the digitalisation of trade, which has long struggled to gain traction.

“The worst thing that can happen – and this providers can agree – is that every country imposes different rules for certification, for which systems are reliable and which are not,” he says.

In a potential harbinger of national fragmentation, France will publish a decree later this year attached to its imminent electronic trade document legislation that will include “the criteria that any technology should comply with, in order to be deemed ‘reliable’”.

Although loathe to see a global patchwork of reliability assessments, Čekrlić says the most likely outcome is a version of current practice, where the reliability of platforms is assessed by their users. Banks, for example, currently subject platforms to rigorous checks before on-boarding them.

“The reliability in the end is going to be allowed to be decided by each specific pair in the market themselves.”

“It should be a prerogative of each specific player in the market,” he tells GTR. “If I go and talk to a corporate, it ought to be their decision if they say I’m a reliable system or not,” he adds, pointing to concerns about how much a certificate scheme could cost all players, how to ensure that everybody agrees on the overseeing body, and how that body would verify technical claims and  requirements.

“At this time I’m not quite certain that there could be a general worldwide consensus on saying which system is reliable or not; I think it’s going to be more shades of grey.”

Mar says that while it be “totally understandable” for countries to adopt their own approaches, the DSI hopes national authorities could still use the new assessment framework as a foundation and build any additional requirements on top in order to keep friction and additional costs low.


Reliability ‘milestone’

The question of reliable systems is also linked to another thorny issue in the digital trade landscape: interoperability between platforms.

Currently, it is difficult for a company using one platform to conduct trade using electronic documents with another company using a different platform, which is seen as an obstacle to faster adoption of paperless trade.

Being able to confidently determine which platforms are reliable is “a key imperative milestone to reach interoperability”, says Boaz Lessem, chief legal regulation and partnerships officer at WaveBL.

“I can’t become interoperable with a platform that someone could consider is not reliable later on,” he says. “It’s a condition for interoperability.”

Shortly after giving the assessment model to the platforms, the DSI separately launched a new guide on common digital standards for trade documents, in another initiative it hopes will further spur interoperability.

The platforms are optimistic that even if the DSI’s framework does not immediately lead to a globally recognised scheme, it could be ready within a few months and soon be of use to parties involved in international trade.

Zekkar says the draft model drawn up by the DSI would allow users, such as importers, exporters and commodity traders, to compare the approaches of each platform more easily.

It will allow potential platform users conducting due diligence to “compare apples with apples” when choosing which to use, he says.