Electronic Trade Documents Bill [HL]

Debate between Viscount Waverley and Lord Lansley

Second reading committee
Monday 7th November 2022 Grand Committee

[Lord Lansley (Con)]

My Lords, I am very glad to have the opportunity to follow the noble Viscount, Lord Waverley. He is, as he mentioned, co-chair of the all-party group for trade and export promotion, of which I am a member—

[Viscount Waverley (CB)]

Vice-chair.

[Lord Lansley (Con)]

Indeed—I am a vice-chair. I thought the noble Viscount made some interesting points, and I very much join him in welcoming the Bill.

Sometimes, we are wont to criticise Bills that are in the form of a framework but, in this instance, there is an understandable structure here from the Law Commission. In the adoption of electronic trade documents, it encountered the legal constraint of the possession of electronic trade documents as a common-law principle and, rather than try to codify and put into statute everything relating to the common law in this respect, it said, “Let us at least try to equate electronic trade documents to paper documents in statute.” This will allow us to see how some of the courts’ decisions over time enable those established principles in relation to paper documents to be extended into electronic trade documents, which would be very helpful.

We are, therefore, dealing with a Bill that is technology neutral. I know that my noble friend Lord Holmes of Richmond knows far more about the technology of these things than I do; I hope he will agree that a technology-neutral Bill is a good structure for us to work with.

I want to talk about a number of other things. I am a member of the International Agreements Committee of your Lordships’ House and we have had the opportunity to look at some of the agreements that we are now entering into; for example, on digital trade with Singapore and the free trade agreements that we have entered into with Australia and New Zealand, as well as the prospect of entering the CPTPP agreement, which, in the context of regional, international and plurilateral agreements, is probably the most advanced in its promotion of digital trade. There is no point having such agreements that open these opportunities for digital trade if we do not put the literal building blocks of digital trade in place.

Last October, the G7 group of Trade Ministers agreed digital trade principles. I think the United Kingdom was instrumental in enabling that to be brought together; it is therefore terrific that we are implementing it rapidly in our legislation. As the noble Viscount, Lord Waverley, said, I hope other countries will take similar steps to put their jurisdictions into a similar framework. I hope we will look toward the framework of the United Nations Commission on International Trade Law, the Model Law on Electronic Transferable Records, to which the noble Viscount referred. The more that jurisdictions across the globe can structure their legislation domestically on an international template of that kind, the better.

We have a particular responsibility because, for so many of these international trade documents, in so far as they have a legal base, they have it in English law. I am advised that 80% of bills of lading, if they were challenged, would be challenged in an English court. We really need to make sure that our law is a leader in this respect. I hope we will find that during our work on this Bill.

I entirely applaud the Bill’s overall structure and intentions. My noble friend the Minister very well and happily set out all the substantial benefits that can accrue from this, in trade, economic and environmental terms. I very much look forward to our achieving those. However, there are issues we need to discuss, notwithstanding this being a Law Commission Bill; by its nature, we need to examine it—it is our job as a revising Chamber to look at it very carefully and ask all the questions, not least so that the other place can be confident that it can pass it happily and quickly.

I will refer to a range of issues. Underlying this is the fact that, if we are not trying to structure the legislation around the concept of the possession of electronic trade documents, we are none the less trying to adopt what is referred to as exclusive control in the singularity of electronic trade documents. It is difficult. The explanatory notes to the model law in UNCITRAL captured it rather well at paragraph 82, which says that

“a paper document, as a physical object, is by nature unique and, furthermore, centuries of use of paper in business transactions have provided sufficient information to commercial operators for an assessment of the risks associated with the use of that medium, while practices relating to the use of electronic transferable records are not yet equally well established.”

We need to be sure that we understand where the risks emerge. There are potential benefits associated with the use of electronic documents, as my noble friend will doubtless explain, including those in security and reliability, but there are also risks.

I hope the House will establish a Public Bill Committee to examine this Bill so, before I stop, I will raise a number of issues. I do not ask my noble friend to reply to them in this debate; they are more appropriate for the committee, but I thought it would not hurt to flag them up, simply because in my preparation for today I encountered a number of issues that I thought would be interesting to discuss.

First, there is a reference in Article 13 of the model law under UNCITRAL to time. Provisions relating to the indication of time and place are found in many trade documents; there may well be mechanisms through which we can make the time of documents electronically secure, but not necessarily in the same way as we do with paper documents. This concept of “reliability” will have to be extended to time on documents as well as to other factors. Since Article 12 of the model law is transposed almost literally into this Bill, for example, I wondered why we have not transposed one or two other aspects of it in the same way.

Secondly, on the question of acting jointly, when one is dealing with paper documents, one knows who has possession of them. In the context of electronic documents, not least because of some of the technological aspects, such as the number of people who have access to a private key, we may deal with people who have to act jointly in circumstances that would not be evident for paper documents. We need to understand the safeguards associated with the intentions of people acting jointly, because the Bill rests upon that understanding and how it will be achieved.

Thirdly, there is a whole process in Clause 4 by which documents can be transferred from paper to electronic or electronic to paper forms. The Bill is clear that this has to be in circumstances made evident in the respective documents. However, if I recall the Explanatory Notes correctly, it is clear that, while that should be the case, if it is not, it does not automatically follow that the electronic trade document concerned is not valid. It may still meet the criteria to be a valid document for these purposes. I would like to explore in Committee how that is the case and what happens in circumstances where documents are transferred from one form to another, not least because there is greater risk of duplication in such a case.

Clause 1(2) lists examples of documents. This is not the same as the list in the model law. I know that this is not exhaustive—it is indicative—but I do not understand why, in paragraph 38 of the explanatory notes to the UNCITRAL model law, for example, there is a reference to

“bills of exchange; cheques; promissory notes; consignment notes; bills of lading; warehouse receipts; insurance certificates; and air waybills.”

This is not the same as the list in the Bill. Why is it different and what are the justifications for those differences?

A question we need to follow up and explore further in the debate is the intention of the Law Commission. It says it is going to come on to the interaction between these changes and private international law, but we need to think particularly about the transitional issues—I hope they are only transitional—associated with our jurisdiction creating valid electronic trade documents when other jurisdictions do not. How do we deal with those connections? From our point of view, similar to the discussion on a single trade window, we want interoperability. We want our borders to be frictionless and other borders to be frictionless. That means they need to be aligned in various ways, including in those jurisdictions.

I want to make two final points. First, I want to explore what the voluntary industry standards are for the purposes of the reliability standard. Secondly, in paragraph 36 of the Explanatory Notes to the Bill, there is an expectation that documents are original, but there can of course be multiple original documents. There can be multiple paper documents that are treated as original. The explanatory notes for the model law make it clear that this is something that electronic trade documents do more readily. We have to understand that these documents are not necessarily singular and how to deal with them when they are not, but are multiples that are original.

I hope that gives your Lordships a sense of the discussions we might have in Committee. I very much share what I hope is the collective view of the House: I support this Bill and want to see it make good progress quickly.