The imminent passage of the Electronic Trade Documents Bill in the UK is not only a transformative milestone for global trade, but also a triumph of cross-industry collaboration.
Stakeholders across the trade ecosystem have been unanimous in their support of this enabling piece of legislation. In the months since the bill was first drafted, several industry players have appeared before lawmakers to explain the benefits of giving electronic documents the same legal validity as their paper counterparts in trade – as well as providing reassurance that solutions already exist to do this in a trusted and secure way.
Lars Hansén, senior advisor at Enigio, a Swedish technology provider, was one of these expert witnesses. During a hearing at the House of Lords, he described how the company’s solution trace:original creates a freely transferrable and possessable digital asset that is functionally equivalent to a paper document, in line with the specifications laid out in UNCITRAL’s Model Law on Electronic Transferable Records.
In this Industry Perspective, he discusses his experience, and underscores the importance of co-operation to ensure everyone can capitalise on the benefits of this ground-breaking legal reform.
Q: What has been your experience in getting lawmakers to understand the concept of electronic trade documents such as those created using Enigio’s technology, and how have you addressed their concerns?
Hansén: Enigio has been working on this for quite some time, and it has been a bit of a challenge as this is new technology. There are multiple issues when you talk to lawmakers and lawyers. The first is that lawyers are hesitant about new technologies, because they have to assess the expected legal outcome. This is no surprise, given that they mostly deal with situations where things go wrong, but it requires technical and legal experience with the processes involved.
The lawyers have been quite crisp about the challenges, as well as raising some interesting questions that we had to address such as change of form from electronic to paper and vice versa. When we talk about documents like bills of lading or bills of exchange, we are referring to documents that have been in use for centuries and always had a wet signature on them. So, when we proposed to make them digital, concerns were raised about the possibility of creating fake documents. The fact is that paper documents and signatures are easier to forge compared to their electronic equivalents. This is where our trace:original technology comes in to provide a technical solution to this legal conundrum.
When you create an electronic document, it is not as straightforward as creating a paper document. When you write on paper, you are signing the original document, and the singularity is there by default. But when you sign an electronic document, you need to prove that it is your signature and that it is tied to the content of the document, and the document must be versioned. Only then do you have a singularity required by the law.
Q: How comfortable are businesses with the concept of electronic trade documents?
Hansén: One of the significant benefits of electronic trade documents is the ability to streamline payment processes. For instance, a bill of exchange can be created and discounted within days, rather than weeks. This creates the incentive for change. We have found that large corporates are comfortable with our solution and are enthusiastic about the benefits. However, educating SMEs on electronic trade documents and how easy it is to work with them once they are created is a crucial challenge. Here is where industry-wide collaboration comes in: having the support of the banks as well as trade and industry organisations, for example, is a significant trust-building factor.
Q: What is your outlook on how the legal reform will impact the adoption of electronic trade documents in the UK, and what do you see as the key factors for success?
Hansén: We believe the legal reform will democratise digital trade and make it accessible to all, particularly SMEs. Sustainability is also a significant benefit, as the need to ship physical documents and store them for accounting reasons will no longer be necessary.
Our belief is that the transformation will be an evolution, rather than a revolution. It will take time for companies to shift from paper to digital, and some individuals may be hesitant to trust machines over paper. Therefore, two core factors are crucial for success. Firstly, the initial investment for companies transitioning to paperless should be reasonable, and the technology must be reasonably priced. Secondly, the implementation of the technology needs to be seamless, with paper and digital documents living side by side without requiring a change in processes. It’s also essential to be able to change media or format, from digital to paper or vice-versa.
For greater comfort, we would like to see lawyers and government promote the use of electronic trade documents. Here, bodies such as the International Chamber of Commerce could play a role. The value of these documents is significant, and it’s vital that they are watertight and meet all the requirements set out by the law. However, a PDF is not equivalent to paper, and adding features to it does not necessarily make it equivalent either. Working with a trusted solution provider is crucial.
Q: How important is collaboration and co-operation to the success of trade digitisation?
Hansén: Taking advantage of the Electronic Trade Documents Bill in the UK could bring substantial benefits to the country. For digital trade to become a reality, it’s important to start simple and not overcomplicate things, building on foundational building blocks that are already in use today. The banking community has a significant responsibility to adopt electronic trade documents, as they have the infrastructure, customers and web portals to make them available to everyone. Furthermore, the government can promote the use of electronic trade documents by consistently including digital trade considerations when negotiating its free trade agreements. An attitude change is necessary to embrace new technology and solutions, and everyone needs to be on board, from businesses to banks, industry bodies and the authorities.