ETDA 2023 – a defining moment for electronic bills of lading

Published: 15 December 2023

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One of the commonly cited reasons was legal uncertainty due to few jurisdictions recognising eBLs as being legally equivalent to paper bills. The good news is that there is now a determined drive globally towards legislative reform to give eBLs legal status. Governments are now acting on the benefits that digitalisation brings such as reduced business costs, faster transaction speed, increased trade opportunities and easier access to trade finance – all brought by digitalisation.

One of the most significant legal developments in 2023 has been the UK’s Electronic Trade Documents Act (ETDA) which took effect on 20 September. The ETDA is based on the UNCITRAL Model Law on Electronic Transferable Records 2017 (MLETR) which has already been incorporated into local law in important trading hubs, for example in Singapore’s Electronic Transactions (Amendment) Act 2021. Other nations such as Germany, France and the Netherlands are also developing new legislation to support electronic trade documents. ETDA forms a valuable building block in the globalisation and harmonisation of digitalised trade. However, as other countries adopt MLETR-compatible legislation, it is important that we don’t lose sight of the need for harmonisation of laws to ensure certainty in a global digital ecosystem.

ETDA is significant because it is estimated that the majority of bills of lading are subject, by choice, to English law. This means that its influence on trade extends internationally far beyond the borders of the UK and its share of global trade.

In terms of how the ETDA will impact the use of electronic bills of lading, we can expect 2024 to bring some interesting trials. At present, electronic bills of lading are used in “closed systems” that require all the stakeholders to agree to use the same system and be bound to a set of bylaws (commonly known as a “Rule Book”). These rule books are often quite extensive documents which need to be approved by the International Group of P&I Clubs (IGP&I). The approval process exists primarily to provide ocean carriers with certainty that their P&I insurance cover will not be prejudiced by agreeing to use an eBL. The ETDA largely does away with the need for significant parts of a Rule Book so long as the eBL system used meets the requirements of the legislation. This makes the process of “on boarding” much faster and offers the prospect of interoperability between platforms in the near future. The important role of the IGP&I as an approval body will most likely change as new legislation begins to grip globally. But the need for certainty of P&I cover will not diminish and will remain an essential element for ocean carriers.

Not surprisingly, given the rapid rate at which technology develops and the wish to remain “future proof”, the ETDA is technology neutral. The legislation simply describes what a system must be capable of in terms of the accessibility, security and possession of electronic trade documents. A “reliable system” under the ETDA will be determined by trade and the courts. We can expect to see some creative solutions from eBL software solutions in the coming year as the industry attempts to find an acceptable universal standard.

The FIT Alliance believes that the ETDA will act as a catalyst to legislative change in the global community and help further accelerate the adoption of eBLs in 2024 and beyond. Support for eBLs is growing steadily as evidenced by the FIT Alliance’s eBL Declaration launched on 5 September, which already has close to 100 signatories from a broad range of stakeholders. Among the signatories are the very welcome presence of some major banks whose public support will help reduce the barrier to entry for many stakeholders. The FIT Alliance will enter 2024 confident that its efforts to encourage the transition to eBLs are being appreciated by an ever growing and receptive audience in the business community.