The International Chamber of Commerce (ICC) has produced a practical guide for governments to follow in order to enact the legal reform needed to enable electronic transferable records and optimise cross-border trade, GTR can reveal.
Titled Creating a Modern Digital Ecosystem, the guide is designed to assist policymakers in creating a conducive legal environment for paperless trade through the modernisation of e-commerce legislation as well as alignment with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Transferable Records (MLETR).
Drawing on lessons learned by those jurisdictions that have already amended their legal frameworks – the Abu Dhabi Global Market, Bahrain, Belize, Kiribati, Paraguay and Singapore – and incorporating insights from the ongoing process towards recognising digital trade documents that is currently underway in the G7 nations, the guide lays out the work that needs to be completed in order to move from project inception through to the passage of legislation in parliament. Though experiences will obviously vary across jurisdictions, the ICC guide posits that the whole process can typically be completed within a year and a half.
“In the case of the UK, the whole process will have taken three years,” the guide says. “In the case of Belize, the process took one year from project inception to bill adoption. Important lessons have been learnt that should enable other countries to achieve legislative reform in approximately 18 months. Condensing the initial scoping phase is now possible.”
The guide’s publication comes after a year in which significant progress has been made toward dramatically cutting trade costs, removing bureaucracy, and enabling more small companies to participate in the global trading system. At the start of 2021 just two jurisdictions had reformed and aligned their legal systems to digitalise trade. As the year comes to an end, six countries will have aligned their systems – with the UK scheduled to become the first G7 country to join the group in mid-2022.
“We’ve made tremendous progress this year,” Raoul Renard, legal reform lead at the ICC Secretariat, tells GTR. “Beyond the six MLETR-compliant jurisdictions, the G7 Framework for Collaboration on Electronic Transferable Records is in full swing, a provision encouraging adoption of MLETR is being discussed in the plurilateral e-commerce negotiations in Geneva, and several jurisdictions have bills to adopt MLETR in the pipeline. 2021 put MLETR on the policy map for many trading nations – 2022 will be a year of implementation.”
However, maintaining momentum is challenging, says Chris Southworth, secretary general of ICC UK, to GTR. “Whilst the case for legal reform is overwhelming, it is far from a given,” he says. “It won’t happen unless industry pushes for it to happen. There is a view in some quarters of government that the digitalisation of the trade ecosystem is a job for industry not government and there is a failure to understand that it can’t happen without legal reform to accept all trade documents in digital form.”
Last month, the ICC released research demonstrating the macroeconomic business case for trade digitalisation. It found that if the G7 countries can achieve the legal reform, standardisation and adoption of digital records that their digital and technology ministers committed to earlier this year, trade would climb by nearly 43% on 2019 values by 2026 – or an increase of a massive US$9tn.
“The first reaction is usually disbelief that the numbers on the business case are so big,” says Southworth. “Now that we have the business cases and G7 support, the persuasion piece is becoming noticeably easier, however the big conversation is how we get scale and how we implement legislative reform. It can be daunting for many, so what we have done with the guide is break down the process in a methodical and practical way.”
The first stage of the process, according to the guide, is project co-ordination and management, whereby policymakers are being called upon to identify government and industry stakeholders to lead the charge.
“Lack of clear leadership in government is one of the biggest barriers,” says Southworth. “Without any one department taking ownership for the agenda, it tends to slip through the gaps. Old government structures aren’t meeting the needs of modern digital trade; there are too many siloes when what trade needs is a joined-up approach.”
The second workstream is around scoping out the legal barriers to digitalised trade. In the guide, the ICC provides a checklist for various consultative processes that need to be held between government and industry in order to do so.
“The onus is on industry to press the case for government action and assure government that once it takes action to reform the legal system, industry will be proactive in collaborating to standardise trade systems and allow solutions to be delivered at scale,” Southworth tells GTR. “Industry has to assure governments that it will act not in self interest but for the good of the market.”
A third workstream, which the ICC recommends is held concurrently with the second, involves checking whether government agencies – be those internal or business-facing – will need to update their systems in order to handle electronic trade documents, and includes tasks such as running pilots in key trade corridors to identify and resolve any teething problems.
The final checklist covers market preparation and adoption. “Once a timetable for legislative reform has been agreed, the focus can shift to begin the process of informing industry and preparing the market for the changes that are coming,” the guide says.
Beyond these practical descriptions of the processes to follow, the guide also covers the more granular legal considerations that policymakers may need to factor in when adopting MLETR into their domestic jurisdictions – such as whether or not the trade instruments to which it applies need to be explicitly identified. In addition, it covers key challenges that certain types of jurisdictions may need to overcome. For example, it calls out the potential difficulties faced by federal systems in establishing a suitable overarching national framework in order to avoid a “patchwork” of state-based systems.
The guide is now available for use by policymakers, and the ICC says that it intends to work with those jurisdictions that have shown receptivity towards legal reform in order to drive change across the multilateral system – and bring trade into the digital age once and for all.