Electronic Trade Documents Bill [HL]
Wednesday 12th October 2022
(1 year, 6 months ago)
Lords ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text
Electronic Trade Documents Bill [HL]
Monday 7th November 2022
(1 year, 5 months ago)
Grand CommitteeRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, I am grateful for the Committee’s understanding. I have just finished answering a Private Notice Question in the Chamber.
The Bill allows for the use in electronic form of certain trade documents, such as bills of lading and bills of exchange, which currently have to be on paper and physically possessed. It implements the recommendations made by the Law Commission of England and Wales in its report on electronic trade documents, which was published earlier this year. The Bill is not mandatory: it is a permissive and facilitative piece of legislation. Though it is only a small Bill, of seven clauses in length, its impact will be huge. It will help to boost the UK’s international trade, already worth more than £1.4 trillion, by providing benefits to UK businesses over the next 10 years of £1.1 billion.
In short, the Bill will allow businesses to use electronic trade documents when buying and selling internationally, making it easier, cheaper, faster and more secure for them to trade. It is fully supported by the businesses and industries that it is designed to help. The Government’s role here is simply to remove an obstacle to progress and to pave the way for international trade and trade law to be brought up to date.
The Law Commission published its recommendations and draft legislation in March this year. In its report, it made recommendations for legislative reform to allow trade documents in electronic form which can satisfy certain criteria to have the same legal effect and functionality as their paper counterparts. The Law Commission undertook significant consultation on the aim and contents of the Bill throughout the development of its recommendations. It spoke to a wide range of interested parties, including academics, lawyers, trade experts and industry representatives.
No previous attempts have been made to legislate in this area, which is one of the factors that makes this Bill unique and novel. While the Law Commission’s recommendations are for the law of England and Wales, we have worked with the territorial offices and devolved Administrations to ensure that the Bill can be extended to Scotland and Northern Ireland to ensure that businesses across the UK can benefit from this important development.
Business-to-business documents such as bills of lading, which are contracts between parties involved in shipping goods, and bills of exchange, which are used to help importers and exporters complete transactions, currently have to be paper-based. Existing laws, such as the Bills of Exchange Act 1882 and the Carriage of Goods by Sea Act 1992, did not envisage the digitisation of these documents. This Bill seeks to modernise the law, enabling this move to digital trade documents. Under the Bill, digital trade documents will be put on the same legal footing as their paper-based equivalents, giving UK businesses more choice and flexibility in how they trade.
The impact of the Bill cannot be overstated. Whether it is lowering transaction costs associated with trade by reducing resourcing and operational costs and increasing productivity; whether it is increasing efficiency and encouraging business growth by facilitating the development of digital products and services; whether it is delivering environmental benefits through a reduction in paper documents and emissions from couriering the paper documents; or, critically, whether it is increasing the security, transparency, traceability and transactional data of the flows of goods and finance—the Bill has the potential to revolutionise UK businesses’ ability to trade across borders.
To illustrate this, the process of moving goods across borders involves a range of actors, including those involved in transportation, insurance, finance and logistics. One trade finance transaction typically involves 20 different parties using between 10 and 20 paper documents, totalling over 100 pages. Research carried out by industry and academia has produced the following illuminating statistics and figures.
The use of electronic trade documents will reduce trade contract processing times from between seven and 10 days to as little as 20 seconds, according to the industry publication Trade Finance Global. The Digital Container Shipping Association estimates that, if 50% of the container shipping industry adopted electronic bills of lading, the collective global savings would be around £3.6 billion per annum. The International Chamber of Commerce estimates that small and medium businesses could see a 13% increase in international business if trade is digitised, and the World Economic Forum has found that digitising trade documents could reduce global carbon dioxide emissions from logistics by as much as 12%. Electronic trade documents also increase security and compliance by making it easier to trace records.
The Bill will lay the foundations for the future digitisation of our global trade approach and ambitions. I hope it receives strong support from your Lordships and I look forward to noble Lords’ contributions to this debate. I beg to move.
Viscount Waverley (CB)
My Lords, the Minister intimated that this is a milestone, innovative Bill, so with the leave of the Committee I intend to follow that theme and be equally innovative.
One of the essential ingredients to make progress with the global trading community is to combine innovation, build efficiency and create sustainability and to do so by joining the dots—putting the jigsaw into place, if you will. Currently there are different excellent components that could usefully be harnessed into a unified approach, rather than being taken in isolation. Over the past months, I have been reflecting on a possible global trade blueprint and will take the extended opportunity afforded today to put into context three ingredients that could dovetail with the Electronic Trade Documents Bill, which would be a key component. However, none is dependent on any other.
The first lends itself well, as the Commonwealth is fertile ground given the commonality of common law and language, which is the bedrock of this Electronic Trade Documents Bill. It is a free trade agreement template initially targeting Commonwealth member states, excluding the two that are members of the EU as they are responsible to internal protocols, that can be adjusted by country to address any specific anomalies. I was originally approached some time back by a well-meaning US interest to stitch together a US/Commonwealth agreement, including the UK, of course, that would unlock the UK/US circumstance, given that the bilateral free trade agreement is moribund. This Commonwealth approach would consist of making a template of what is expected to be covered in a trade agreement with language options built in. To fast forward to the week before last, I was delighted to learn at first hand that our very own noble Lord, Lord Hannan, who is not in his place, is also running with this ball with his Institute for Free Trade, in a most welcome development.
The second is a dedicated, big-data analytics platform to encompass advanced data analytics and modelling for foreign trade data relating to supply chains in order to consolidate multiple datasets already used by the International Trade Council. These datasets, with additional overlays into a single database, could be used for analysis of markets and supply chains, forecasting and predicting market behaviour. This would enable corporates to validate their supply chains, understand market pricing, monitor competitors and forecast the market and would allow Governments seeking to assist their exporters to find new markets, identify priority investment FDI targets and model future market demand, growth, customers and suppliers. A UK entity is in the making to transition this data for global consumption.
Thirdly, and this brings me full cycle to the Electronic Trade Documents Bill, the magic is that it is all the more beneficial for being an enabler process, free for the world to join up to—just follow the provisions. If the answer to today’s ails is in the timing, this initiative hits the spot with the legal enactment necessary to a more competitive world to the benefit of all. Passing this law would be a victory for global trade and for the United Nations, as the legislative work is led through the UN Model Law on Electronic Transferable Records—MLETR. By allowing electronic documents and physical documents to be used in parallel, the transition to paperless trade can be made an evolutionary process where the adoption of electronic trade documents will take place when different stakeholders in trade and trade finance are ready to take the step to paperless trade.
Radical change in removing paper-based trading documents will make for a faster, lower-cost, more resilient and more liquid world of trading, leading towards transparent digital supply chain management. It will be especially good for small businesses. While all problems cannot be solved at once, recognising a practical step-by-step approach to solve one would be an excellent beginning.
The Bill is core to the success of improving logistical flow that will address the impediment to the speed of payments, and the current need to move paper to discharge goods and receive payments, bringing more opportunities as we align with the MLETR and benefit from digital trade corridors and individual country compliance, to which I have referred. This will allow for documents that carry value and promises to be drawn up and signed in digital form, provided that the system or document fulfils the listed requirements of the Bill.
A number of trade documents with which domestic and cross-border trade would become significantly more efficient and affordable for all are listed, but small and medium-sized entities would benefit the most. This will create significant opportunities for smaller importers and exporters globally, one reason being that the law of England and Wales is often used when parties have difficulties agreeing on the jurisdiction in which to settle disputes.
Therefore, the Bill brings benefits not only for the United Kingdom but for importers, exporters, carriers, brokers and bankers internationally. It should be recognised that the Bill is a stepping-stone towards enabling the modernisation of domestic and international trade, but more needs to be done to reduce friction in trade and trade finance.
Four questions come to mind which illustrate this and I would be grateful for the Government’s view. Are they satisfied that: international digital identities are sufficiently harmonised; international digital signatory laws are harmonised; international freight tracking systems with a lack of interoperability are a hurdle that needs to be overcome; and legal entity identifiers are accepted universally?
Significant work is being done and progress is being made in these areas by industry organisations but this needs to be supported by Governments to pave the way for international harmonisation and adoption. It will be a balancing act to create international standards in such a way that creates legal certainty on the one hand without hampering further adoption of new technologies or innovation on the other.
The United Nations Model Law on Electronic Transferable Records is a very well-designed framework, balancing the need for commercial certainty, relying on current and internationally well-harmonised substantive laws, with allowing for electronic trade documents, providing that the provisions in the MLETR are met.
The Bill will play a pivotal role when other countries revise their bills of exchange acts and other trade-related legislation when promoting alignment to the MLETR. I anticipate that this will become a global trend, with law changes already taking place in North America, South America, the Middle East, Asia and Europe.
The Bill does not change the function of the instruments listed in the Bill. All the safety mechanisms these instruments have and cater for remain intact. Allowing them to be in electronic format means that they will become more efficient and significantly safer. I underline, however, that the Bill does not address the quality of signatures or how to establish identities, other than to say that they need to be “reliable”. The European Union has a list of trusted digital signature sites and for trade it is important that different parties can use simple verification processes to trust the documents coming from another party, but it is up to the contracting parties to define the method to ensure reliability.
What is reliable today, however, will differ tomorrow as new technology evolves. Legislation that is principles-based rather than technically prescriptive is more favourable. The adoption of the EU regulation for eID and other electronic trust services has been slow in cross-border trade, the main reason being that these have not been readily available and easily accessible as technical solutions. The result has been paper-based trade rather than electronic. Although not perfect, in some cases a lower standard is the stepping-stone for adoption, especially in cross-border dealings, provided that the parties have agreed on where to settle disputes.
The Bill does not resolve the development and standardisation of eID and signature technologies, however, which must continue to evolve. We will also see new payment and settlement solutions, possibly decentralised, as we realise that large players such as MasterCard and Visa will come to have a large degree of global systemic risks associated.
The Bill will help to encourage the development of solutions that will address deficiencies. To take some examples to illustrate progress, Trace:Original, a product of Enigio of Sweden, is producing the means by which electronic documents that will be trade finance-enabled yet functionally equivalent to a paper document, which will render documents paperless using existing processes and international practices, provided that this Electronic Trade Documents Bill passes. I am informed that Lloyds Bank is showcasing the technology available and that the efficiency gains are significant for all concerned. There is also noteworthy development with Contained’s BlueRing platform as a technology solution advancing the process.
It is essential that there be a key role for the Commonwealth Secretariat in informing and encouraging Governments. We should also look at a mix of the Institute of Export and International Trade—with which I am also discussing the role of secretariat to the All-Party Parliamentary Group for Trade and Investment, which I co-chair—with additional support from the International Chamber of Commerce, as an architect of this Bill, together with a secondee of HMRC of this electronic trade initiative. A trade advisory to Governments, International Economics, might also be well suited to act as a global co-ordinator.
These are early days, with much to do and no time to lose. This enabling Bill is, however, the beginning of an exciting journey that ticks the boxes and I commend it accordingly.
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—
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.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this Second Reading consideration and to follow my noble friend Lord Lansley. I congratulate my noble friend the Minister on his return to the Front Bench. He is back in physical form and was not in digital form for very long, but it is great to have him back on the Front Bench. I also congratulate him on the way in which introduced this small but incredibly significant piece of legislation.
I would like to set out the problem, the solution and the potential benefits. Before I do that, it is worth also giving thanks to all those who have got us to this stage, not least Professor Sarah Green at the Law Commission, those at the International Chamber of Commerce, not least Chris Southworth, and many others who have worked to get the Bill into condition for our consideration this afternoon. The problem is pretty simple: to have possession of goods—if they are under a bill of lading, for example—you must be able to possess that document. It is much more than a contract merely setting out terms; it is a possessive document. Possess the paper and you possess the goods. How is it possible to take this ownership into a digital and intangible, and as yet in so many ways so contested, world?
Fortunately, because of new and emerging technologies —the technologies of the fourth industrial revolution—we now have such an opportunity. I agree entirely with my noble friend Lord Lansley that although distributed ledger technology, or blockchain, currently offers great possibilities in this space, in no sense should the Bill be anything other than neutral about technologies. What we can be absolutely certain of is that a plurality of technologies will be coming through, which potentially—not inevitably—can do great service for us in this and other areas.
The solution is the legislation before us. It is the digital standards initiative, worked upon by the ICC and the WTO. That technology, not least because of its ability to enable immutability and interoperability, is why I undertook research to report on distributed ledger technology in 2017. I wanted to highlight the potential public and private good for the nation from that technology. Had I not done that, the fear, which is as clear and present a danger today as it was back in 2017, is that all too often blockchain is seen as bitcoin, which is seen by many as suboptimal. Thus all the potential public and private benefits—potential, not inevitable—of distributed ledger technology could be lost even before we got beyond proof of concept. Those three elements—legislation, standards and technology —give us the opportunities which we are discussing today.
I turn to the benefits. The economic benefits were well set out by my noble friend the Minister. There is £1.4 trillion of business in international trade in the UK currently; if just 50% of bills of lading were put in this format, there would be a £3.6 billion annual benefit for the UK. Respondents to the Law Commission’s consultation asserted a potential 5% saving in transaction cost as a result of this.
Perhaps even more important than the economic benefit, and certainly pertinent today, are the environmental benefits. The World Economic Forum calculates a 10% to 12% reduction in carbon from the logistics business if these measures are fully implemented. At the moment, if a cargo comes into Singapore, for example, without the paperwork as it is in London, someone has to board a plane to go to Singapore to deliver the document because, remember, “possess the document, possess the goods”. There is the economic waste and an environmental impact of those actions. As result of this Bill those seven to 10 days are potentially reduced to a 20-second process with no travel requirement. This could give us the transparency and accountability that we require in our supply chains. Recent history has shown us in painful ways that we do not have the supply chains we currently need or transparency, accountability and sustainability in our supply chains. This legislation could combine origin, ownership and payment liabilities in the same data ecosystem, with all actors being able to access broadly the same data for economic, social and environmental benefits.
The Electronic Trade Documents Bill is in many ways one of the most important Bills, yet currently so few people know about it. It is one of the most important Bills heard of by so few. It has the potential to eliminate over time the 4 billion-plus pieces of paper currently circulating around the world. Crucially, the Bill as drafted is rightly facilitative and permissive. It is not mandatory, and that is quite right. Does my noble friend the Minister agree that even after the passage of the Bill that means a continuing need for industry-led, government-supported efforts to ensure that we continue to provide that combination of legislation, standards and technologies to enable all in this ecosystem to avail themselves of the potential benefits which it enables?
Other issues have already been touched upon which are incredibly significant in this space. What is my noble friend the Minister’s view on where the current work is in terms of the 2025 border strategy and the technologies being deployed there, not least in the potential for atomic settlement at the border and how that could transform the experience for our traders, and on how the current work on digital ID in the UK can lead and interact internationally and ensure that there is that work on standards and that there is interoperability? It is fruitless for any nation to have tip-top digital ID if there is no interoperability. What other work is currently going on in my noble friend’s department and across Whitehall on the deployment and potential use of distributed ledger technology and all the technologies of the fourth industrial revolution? What potential problems is his department currently looking at putting such technologies to?
The Electronic Trade Documents Bill is one of the most significant pieces of legislation which most people have not heard of. It is trade-transforming, tech-enabling, economic growth-generating, carbon-cutting legislation. The UK has such an opportunity when tied to common law to lead, connect and collaborate in this space, not least across the G7, for the benefit of all nations right around the globe. I wish this legislation a safe Second Reading and swift passage into statute.
The Earl of Lindsay (Con)
My Lords, I am grateful to the Committee for the opportunity to make a short contribution in the gap. I greatly welcome the Electronic Trade Documents Bill and, in doing so, declare an interest as chairman of the government-appointed national accreditation body, the United Kingdom Accreditation Service—UKAS. It is in that role particularly that I commend this Bill for the downstream benefits it will bring. They include greater transparency, digital verification and mutual recognition of third-party testing, inspection and certification—all of which are critical to reducing technical barriers to UK and global trade.
More generally, in echoing my noble friend Lord Holmes of Richmond, I welcome the Bill’s purpose to make trade more efficient and sustainable, as well as the important opportunities it will enable in respect of international co-operation and interoperability in digital trade.
Our current paper-based processes are part of a labour-intensive trade system that will benefit from moving to quicker, digitally based transactions. This will be especially welcomed by SMEs, which are often affected most by the complexity and associated costs of trading systems that are heavily paper based. They are likely to be among the largest beneficiaries of a move to digitally based transactions. I wish the Bill well through its further stages.
Lord Fox (LD)
My Lords, when I used to run events to which not many people turned up, in justifying the occasion, I used to tell my boss, “The quantity doesn’t matter; the quality of the people is important.” This debate has demonstrated that and the quality of the speeches that preceded will indicate how low-quality mine is—but I will do my best.
I join the chorus of people welcoming the Minister back to his position. He was hardly gone at all. This in no way disparages his successor and predecessor, who did a sterling job on the Product Security and Telecommunications Infrastructure Bill, as I can personally attest. I wish him well, too.
However, this is a difficult Bill for the Minister because, although it is cast as a digital Bill, it is turning out largely to be a trade Bill. I echo the noble Lord, Lord Lansley, in saying that some questions may be answered during the Public Bill Committee, rather than by the Minister—although noble Lords are always happy to hear his responses.
These Benches welcome the Bill. On the face of it, it is a technical Bill that has broad support from the industry. As we heard, the Government have said that it can bring great improvements in speed and efficiency, such that it reduces costs and cuts the environmental impact of trade. As we know, the Law Commission’s report suggests that the industry generates 4 billion paper documents a year and that the changes could cut the processing time of these to 20 seconds, which is almost no time at all. Never mind the carbon and cost reduction; think of the efficiency and smoothness of this. Getting it right is important because, as the DIT tells us, international trade is worth more than £1.4 trillion to the UK.
But there is another, potentially more significant element to this very slim Bill. It is being viewed by many in the legal world as the first legislative attempt to solve the “possession problem”. It seeks to address the idea that the traditional understanding of what it means to possess something is no longer adequate in our digital age. The noble Lords, Lord Holmes and Lord Lansley, alluded to that. The principles of English law that underpin the use of trade documents are based largely on historical mercantile practices. Here I have a vision of coffee shops, with Dr Johnson looking on, as insurance and bills of lading papers march in and out. Frankly, that was happening and it is what we seek to transpose with this Bill. Most trade documents rely on physical possession to be legal and, in this country, there is no legal recognition of electronic trade documents, which this Bill seeks to fix.
The Explanatory Notes put this well—I put it on record because it is the nub of the Bill:
“a bill of lading is a document used in the carriage of goods by sea which, when transferred to a buyer (or any subsequent lawful holder), gives that holder constructive possession of the goods described in the bill, and a right to claim delivery of them from the carrier.”
The document equals the goods, so that is what we seek to reproduce in electronic form. The way in which the law, as it stands, treats that permission is premised on the idea that electronic documents cannot have the same relevant legal properties as physical pieces of paper—to whit, exclusivity or the ability to be associated with a single person. However, as we have heard, technology has now reached a point where electronic documents can be created which have these properties. I commend the noble Lord, Lord Holmes, on expertly setting out the properties, for example, of distributed ledger technology in this regard although, as he points out, we must remain technology-neutral in the legislation.
We have also heard that a number of countries have taken steps to recognise the use of electronic documents as legally valid. The most obvious example was set out by the noble Viscount and the noble Lord, Lord Lansley: the Model Law on Electronic Transferable Records, the beautifully named MLETR. This is supported by major stakeholders such as the International Chamber of Commerce as an international solution to the possession problem and, I am told, has been implemented in Bahrain, Singapore and Abu Dhabi. To be recognised as legally valid under the MLETR, an electronic document must, through a reliable method, be capable of being subject to an identifiable person’s exclusive control. I repeat: a reliable method.
With this backdrop, and at the Government’s behest, the Law Commission looked at this. The Government have acted on its final recommendations, made in March 2022, and brought forward this Bill, which proposes three criteria that electronic trade documents should be subject to, reflected in Clause 2. I will not read them out, but they are independent existence, exclusive control and that the document must be fully divested on transfer.
As I have said, we support the Bill and its aims. However, it has implications around solving the possession problem and we think the committee must focus on that when we discuss it later, as it will need some careful consideration. For example, in its consultation response, the law firm Linklaters considered the issue of control and argued that it is not completely clear whether the Bill refers to legal or factual control. The Law Commission proposals suggest the concept of control should be limited to factual control, but this is not specified in the Bill. The noble Viscount, Lord Waverley, went into deep technical detail but there is a high-level issue, alluded to by the noble Lord, Lord Lansley. Linklaters highlights the practical issues that arise from the requirement that only one person has control. As we have heard, digital keys can be shared to multiple people, so restrictions on sharing could exclude much of the existing technology for moving documents around. Requirements for verification may interfere with the concept of control, especially if this is done through third parties. The committee should also consider this.
As has been said, the Bill does not establish
“what constitutes possession of an electronic trade document”
so it seems to us that the concept of control—and, through that, possession—needs to be more tightly defined. In the end, this Bill’s scrutiny should aim to establish whether the aim of ensuring that paper and electronic documents achieve “equivalent” effect has been achieved.
This Bill is almost identical to the draft Bill from the Law Commission with two obvious exceptions. First, in Clause 5, “Exceptions”, the Law Commission made explicit reference to bearer bonds being exempt from the Bill. This is not referenced in the Government’s Bill; rather, Clause 5(2)(b) says that the Secretary of State can exempt document types by regulations. Why is there this variation between the Bill and what came from the Law Commission?
Secondly, this Bill also varies from the Law Commission’s in the extent that it applies. The Minister referred to this in his opening speech. The Law Commission consultation applied to England and Wales, whereas this Bill applies across the whole of the United Kingdom. The Explanatory Notes state that
“DCMS, in discussion with the Territorial Offices and Devolved Administrations, has extended the extent of the Bill to the whole of the UK.”
The Minister referred to discussions with Scotland, but I do not think that he mentioned Northern Ireland, so I am interested in how that fits. The Scottish law officers said that Scottish law differs from the law of England with respect to possession, so how will the differences in the approaches of the two countries’ laws on possession be covered by this one Bill?
In his opening speech, the Minister talked about the traceability and transparency afforded by digital documentation. I draw a parallel between digital money and cash as an example. However, this sets a number of hares running, because it clearly offers great opportunities for HMRC and indeed law enforcement agencies. How does the Minister see the traceability and transparency to which he referred working? Surely those wishing to conceal what they were doing would continue to operate with paper documentation, so I wonder how far forward we would really get.
As I draw to a close, I would like to address how this Act will be implemented. Like the noble Lord, Lord Holmes, I hope and trust that it quickly becomes law. The Bill allows for documents to be converted between paper and electronic forms, which is key as international trade requires reciprocal recognition of documents and different jurisdictions will recognise electronic documents to varying extents. What consultation are the Government doing internationally to encourage other countries to implement the recognition of electronic documents?
This Bill also presents the potential, as we have heard, for huge cost reduction and environmental benefit, but that is dependent on take-up of digital trade documents. The Minister said that there was potential for £3.6 billion of savings, but that relied on 50% of documents going from paper to digital. What plans do the Government have to advertise this change to business and to help business to take it on? Will the Government monitor the use of digital documents to see how take-up is going, and will they be able to make an assessment of whether further changes are needed to encourage future take-up?
Finally, this is a legislative attempt, as I have said, to solve the “possession problem”. While there is a narrow focus on trade documents in this Bill, it may—and, I think, should—inform government thinking on wider policy in relation to digital assets. In November 2019 the UK Jurisdiction Taskforce published its Legal Statement on Cryptoassets and Smart Contracts and suggested that crypto assets should be treated as property under English law. This principle has since been underlined in case law, but the law is not comprehensive and is still grappling with the particular issues raised by digital assets.
The Law Commission launched a separate consultation on proposals to ensure that the law recognises and protects digital assets in a digitised world. That consultation closed last week, on Friday 4 November. When can we look forward to the results being published? Can the Minister tell us whether it is the Government’s view that this Bill sets a precedent for how future law will cover the possession of crypto assets? I look forward to the Minister’s response and to Committee stage.
Lord Bassam of Brighton (Lab)
My Lords, like all other Members of this Committee I welcome the Minister back to this modest piece of legislation, although it has a truly massive import, as all previous speakers have said today. I have drawn one or two points from their comments.
The noble Viscount, Lord Waverley, made the point that this was a major innovation in legislation and an important part of a jigsaw that needs to fall into place if we are to ensure that our place in the trading world is maintained. The noble Viscount asked four important questions; I shall listen for the answers to them with great interest. As he said, this is part of an exciting journey and one which we obviously need to follow closely. I was deeply impressed by his contribution and that of the noble Lord, Lord Lansley, who accurately described it as an important framework Bill—that is what it is, at seven pages long. With his enormous experience in international trade, I am sure that he will focus laser-like attention on it when we get to Committee. The major issue that he identified was interoperability, which is key to what we are trying to achieve here. Overcoming obstacles around that will be extremely important.
I was grateful to the noble Lord, Lord Holmes, for his comments because he brought the debate into the real world when he said that the Bill could achieve something like 5% savings in transaction costs. In itself, that does not sound like an enormous amount, but when you think about the value of international trade it is vast. Another important point that he made was about the environmental benefits that this legislation could bring. I think we are all very conscious of those now, but he also talked about the importance of accountability and transparency and we, too, on our Benches, very much share that.
The noble Earl, Lord Lindsay, made the important point that SMEs will be the big beneficiaries from this. That is without doubt or question, because clearly it is of enormous advantage to an SME when its transaction costs are reduced and ability to trade speedily is very much underlined. The noble Lord, Lord Fox, talked about the Bill being technical, and it is, but the big problem it has to solve is that of possession. We should all focus on that.
The Labour Benches fully support the introduction of the Bill. We see it as a long overdue reform, which allows for the legal recognition of certain types of documents used in trade and trade finance in electronic form. This will finally mean that parties can use the law that currently applies to paper trade documents when transacting with electronic trade documents.
As we know, the Law Commission does invaluable work in advising on the reform of long outdated legislation. Despite the size and sophistication of the international trade market, many of its processes, and underlying legislation, are based on practices and frameworks developed by the nation’s merchants hundreds of years ago. It is the Bill’s intention that electronic trade documents, when capable of possession, should be treated in law in a manner equivalent to their paper counterparts—a simple notion but one that is obviously complex to implement.
The Bill represents for us a most welcome opportunity to further modernise trade transactions. In theory, it should speed up transactions and bring business into the modern world, where electronic interactivity is commonplace. The Law Commission report said that
“there is an existing set of complex private international law rules that determine which courts have jurisdiction over a dispute, and which country’s laws should be applied to resolve it … these rules are complex and fact specific”.
It then said that electronic trade documents may give rise to
“novel issues … that require further consideration”.
For instance, it continued, there are “inherent difficulties” in ascertaining “the geographical location” of digital assets, including electronic trade documents. Similarly
“questions may arise as to how an electronic trade document issued in England and Wales would be treated by a country that does not recognise the validity of electronic trade documents”.
The Law Commission also recommended that private international law aspects of electronic trade documents should be dealt with in a separate commission project that deals with digital assets more broadly as part of its 14th programme of law reform. I think it was supposed to be completed in mid-2022. Can the Minister advise on what steps will be taken in the meantime to mitigate issues that may arise affecting the operation of trade transactions? Can the Minister undertake to report back to Parliament on the operation of the provisions within a year of the date on which the Act is implemented?
We on our Benches believe it is important that parliamentarians are kept advised of progress in this field. I have nothing much more to add, except that we thank the Law Commission for its critical work on the Bill which we see as largely uncontroversial and of great value in ensuring that the world of trade and commerce operates smoothly and efficiently as possible and that UK businesses are not disadvantaged in any way. This Bill eases those processes and transactions that we need for us to continue to be competitive in a highly competitive world of trade.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am very grateful to all noble Lords who have contributed to today’s debate, including my noble friend Lord Lindsay, who spoke in the gap. As the noble Lord, Lord Fox, rightly said, it is quality not quantity that counts. I am glad that noble Lords who took part were unanimous that although the Bill may be small its potential impact is significant.
In my opening remarks I touched on that transformative impact, and I am keen to emphasise the elegant way that the Bill achieves its goal. It is a simple Bill, although I hesitate to use that word because a great deal of consideration and work has gone into making it so. My noble friend Lord Holmes of Richmond is right to pay tribute by name to some of the people who have been involved in that important work. The Bill achieves what it sets out to do in a minimalistic way. As the noble Viscount, Lord Waverley, said, it is also an enabling Bill which leaves people free to sign up to use it if they wish. The opportunity it presents to bring trade law up to date is immense.
English law underpins the laws of global trade, and all eyes will be on us in the UK as we take this legislation forward. As the noble Viscount, Lord Waverley, said, the benefits will be there for others to accrue beyond these shores. The objective of the Bill is for the UK to take the lead in setting an international standard for how electronic trade documents can be defined and recognised under domestic law with the intention that other jurisdictions will adopt similar laws. The more that other countries harmonise their domestic laws to recognise electronic trade documents, the less it will matter whether UK law and this Bill in particular apply, and that is the case with paper trade documents today.
I am grateful to my noble friend Lord Lansley for highlighting some of the areas that he intends to probe in the Special Public Bill Committee. He is right that the Bill requires that scrutiny there.
I will deal with some of the questions that were raised. I hope it will be useful. I will, of course, look to see whether it is worth writing on further points ahead of the Special Public Bill Committee, although I would be grateful to noble Lords for recognising that that is the place to go into some of the deeper detail. I am always happy to speak to noble Lords ahead of that committee if it would be useful.
I agree with my noble friend Lord Holmes that there are many opportunities for technological solutions. One of the underlying principles of the Bill is that it is technology neutral. It would run counter to the objectives of the Bill if it were to prescribe or mandate a particular electronic trade document system. That would be likely to stifle innovation and risk excluding participants on the basis that their system does not satisfy the Bill’s requirements. The Bill does not specify what constitutes a reliable system or mandate a particular type of system. Rather it sets out various factors that a court may take into account when determining reliability. The Bill therefore offers some guidance on how to assess the reliability of electronic systems. We have been working closely with industry, which is developing standards to ensure reliability and verifiable authentication of electronic trade documents.
Lord Fox (LD)
One issue that is worth investigating further is who is the arbiter of reliability when it comes down to a system. Is it the buyer, the seller, a third party or some accreditation body that says it is reliable?
Lord Parkinson of Whitley Bay (Con)
If I may, I will accept the noble Lord’s invitation to look at this in Committee because it is worthy of the deeper scrutiny that that affords.
A number of noble Lords understandably referred to the United Nations Commission on International Trade Law, or UNCITRAL, and its Model Law on Electronic Transferable Records, or MLETR, which is the international attempt to provide a legal framework for electronic trade documentation that can be adapted and adopted by individual jurisdictions. In developing its recommendations for reform, the Law Commission was particularly cognisant of this model law. The recommendations have been developed with a keen awareness of it, aligning with it where possible and integrating its spirit and objectives into the particularities of the law of the UK. As such, the provisions of the Bill are broadly compatible with the MLETR, but are drafted to cater for the nuances and specificities of UK law.
For example, the Bill expressly and clearly provides that electronic trade documents are capable of possession, while the MLETR provides that control is a functional equivalent to the fact of possession. It is clearer and more direct to extend the application of the concept of possession itself, rather than to use control as a functional equivalent to the fact of possession. That is something that the noble Lord, Lord Fox, touched on in his remarks about restrictions on control.
Within this Bill, control is a question of fact, as reflected by Clause 2(3)(a), which did not feature in the Law Commission’s draft Bill. The Bill does not define possession; it is a common law concept, which is highly flexible. Again, noble Lords will want to discuss this area in Committee, but the Law Commission’s advice, based on extensive research and consultation, is that it would be difficult, if not impossible, to set out in legislation what constitutes possession of an electronic trade document because possession is a fact-specific concept that has always been notoriously difficult to define in abstract terms. Furthermore, it would be impractical to frame legislation to cover the full range of possible solutions that could arise in relation to possessing electronic trade documents, particularly given the potential for technology to develop and give rise to different forms of control and therefore possession. I look forward to discussing this in greater detail in Committee.
The noble Lord, Lord Fox, asked about the territorial extent of the Bill, particularly in relation to Northern Ireland. The Bill is intended to apply UK-wide, as the issues concerning the legal blocker to possessing electronic documents are broadly the same. Apart from the provision in Clause 3(4), which extends only to Scotland and relates to the interaction between the Bill and the Moveable Transactions (Scotland) Bill, the Bill extends UK-wide. It is reserved in relation to Northern Ireland on the basis that the Bill deals with the reserved matter of trade with any place outside the United Kingdom. We have agreed with officials in the Northern Ireland Executive that the legislative consent Motion process is not therefore engaged.
Lord Fox (LD)
Is this Bill compatible with the Northern Ireland protocol? Is it compatible with the unique position that Northern Ireland has within the United Kingdom in having an open border with the EU?
Lord Parkinson of Whitley Bay (Con)
We do not expect the Bill to have any impact on the operation of the Northern Ireland protocol. It is a measure to digitise business-to-business trade documents. It will allow businesses to use electronic trade documents when buying and selling internationally, and the benefits will be realised irrespective of whether trade is internal to the UK market or is global.
The noble Lord, Lord Fox, also asked some further questions about other jurisdictions. DCMS and the Department for International Trade agreed the digital economy agreement with Singapore, which includes a memorandum of understanding that put in place a pilot project to explore and text the interoperability of electronic trade documents.
The noble Viscount, Lord Waverley, asked about digital ID and e-signatures. I certainly agree that digital signatures and digital ID are areas that would benefit from harmonisation. As noble Lords stated, this Bill is merely the first foundational step towards digitisation and interoperability. The Bill is very specific in removing the legal blocker to possession of electronic trade documents; that really is its core purpose. We want to remove an obstacle for UK businesses that trade internationally. In giving electronic trade documents legal effect, we can unlock their current and future potential.
I will of course consult the Official Report of the debate to see whether there are any further points on which it might be useful to follow up before Committee. I look forward to the further scrutiny that this modest but important Bill will receive then. I am very grateful to noble Lords for their remarks and the questions that they have raised today.
Electronic Trade Documents Bill [HL]
Wednesday 30th November 2022
(1 year, 5 months ago)
Lords ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, a Second Reading Committee considered the Bill in the Moses Room on 7 November.
Electronic Trade Documents Bill [HL]
Monday 20th February 2023
(1 year, 2 months ago)
Other BusinessRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Amendment Paper: HL Bill 57-I Marshalled list of amendments for Special Public Bill Committee - (16 Feb 2023)
Lord Lansley (Con)
I will say a few words on Clause 1. On a previous occasion, I drew attention to my interest as a vice-chair of the trade and investment all-party group, which is supported by the International Chamber of Commerce. It and many others gave us the benefit of evidence, and we are all most grateful to our witnesses, not least Professor Sarah Green of the Law Commission, for this. I feel that I now understand, in my own limited way, how the Bill achieves its objectives, and the several particular issues that I raised at Second Reading have been thoroughly explored and answered. Members of the committee will want to thank our chair, the noble and learned Lord, Lord Thomas of Cwmgiedd, who was instrumental in us achieving that, patiently taking us non-lawyers through the provisions from time to time.
On Clause 1, when I spoke at Second Reading I noticed that the list of documents in subsection (2) was not the same as in paragraph 38 of the Explanatory Notes on the model law on electronic trade records. As the Bill states, the list is not exhaustive but indicative. The Law Commission’s consultation gave an indication of which documents in the list possession may most commonly be relevant to. For example, although air waybills are in the MLETR list, the Law Commission concluded that possession of these documents is never required for them to function as intended. By contrast, possession of mates’ receipts, which we discussed in our earlier sessions, may be relevant if transferring them results in the property transfer of ships’ goods. These differences between the two indicative lists are the result of their relative significance in English and Welsh law, as compared to other jurisdictions. The difference is not in itself of significance.
As the Minister’s helpful letter to the committee on 17 February stated, in practice the list in Clause 1(2) gives examples of documents that
“may satisfy all three requirements of sub-clauses 1(1)(a), (b) and (c).”
However, the Bill states that they are
“examples of documents that are commonly used as mentioned in subsection (1)(b)”.
This difference also should not worry us. The Bill is clear that a “paper trade document” is one that satisfies all three requirements. The indicative list, however composed, includes only documents that are commonly used, so the clause serves its purpose.
Lord Clement-Jones (LD)
I am not quite sure about the procedure. Is this a debate on Clause 1 standing part?
Lord Clement-Jones (LD)
I see. The only part of the Bill that we received contrary evidence on was mates’ receipts. If that is the only matter that there was an argument on, we have done pretty well on the Bill so far. I thank our chair for his expertise, which helped us enormously as we went through the Bill; we kicked the tires fairly firmly. I congratulate our Minister, who switched hats seamlessly during the Recess and is now the spokesperson in this area; his versatility clearly knows no bounds. I thank him for his letter, which cites case law that makes the status of mates’ receipts very clear. We also owe the noble Lord, Lord Lansley, quite a bit for unpacking, with his trade expertise, the issues in Clause 1 today and throughout the passage of the Bill.
I am personally quite satisfied, although I have some trepidation. Professor Sir Roy Goode is no mean authority, but we must conclude that the Minister is correct in quoting case law, and I think our chair is very satisfied with how Clause 1, and the documents cited in Clause 1(2), are set out. So I agree with the noble Lord, Lord Lansley, but it is useful that we have explicitly said that we are satisfied in that respect.
Lord Bassam of Brighton (Lab)
I feel provoked to speak. I shall not detain the committee long. I entirely echo what the noble Lord, Lord Clement-Jones, said. The letters from all parties have been extremely helpful, and the noble Lord, Lord Lansley, has played a blinder in trying to draw out the detail, which has helped all of us. This is obviously a very necessary Bill, and I am sure that, in the fullness of time, it will ensure that we as a nation are well placed in the world of electronic trade and electronic trade documentation. I do not have any particular misgivings about the Bill, but I shall of course listen very carefully to what is said in the other clause stand part debates.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
I will not detain the committee long on this clause, not least because I will speak in detail on Clause 2 in a moment. I echo my noble friend Lord Lansley’s thanks to all the members of the committee, with whom it has been a pleasure to work, particularly under the chairmanship of the noble and learned Lord, Lord Thomas of Cwmgiedd, who has helpfully steered our discussions. I express my gratitude to our clerks and all who gave evidence.
I am glad that my noble friend was satisfied by the letter that I sent on 17 February. I am glad to have this opportunity to put that on record. It will of course be published alongside the other Bill documents, so that the explanation contained in it can be seen. It goes without saying that the Government believe that Clause 1, and all the clauses, should stand part.
Lord Lansley (Con)
I tabled a Motion to facilitate a short debate on this clause, in the spirit of what we just discussed, to show not only that we have been assured about the structure of the Bill but that we can demonstrate to those who care to read our proceedings that we have done so and gone through a process; it is a bit like doing arithmetic and showing one’s workings.
In this particular respect, regarding Clause 2, I want to look at the relationship between the Bill and the UNCITRAL model law on electronic trade records. The Bill enables the possession of electronic trade documents in the same way as paper trade documents. The MLETR is based on the principles of technological neutrality and functional equivalence between a transferable document or instrument—as defined in each legal jurisdiction, as they say—and the resulting electronic trade document, based on a reliable system. The MLETR is clear that functional equivalence standards can be achieved using different approaches in different jurisdictions.
The Bill achieves that required effect, taking advantage of the existing legal concept of possession in English and Welsh law and placing the exclusive control of a paper trade document as the functional equivalent of possession. A particular example I raised was the question of time and place indications. Article 13 of the model law provides for indications of time and place, but the Explanatory Notes state that this is to the extent that these are required in the equivalent transferable document.
Clause 2 sets out what is required to constitute an electronic trade document; it is, in effect, about exclusive control of such a document. Clause 2(1) provides that the information required to establish a paper trade document is to be the same as for the equivalent electronic trade document. The following subsection then sets out what is needed for control and for the singularity of the document, so that one should not have multiple requests for performance of the same obligation. Time and place indications are not always required in a paper trade document; if required, they would be covered by both the equivalence provision in the first subsection I referred to and the operation of the reliable system as provided for in subsection (5).
I am not sure that we discussed Clause 2(1). I think it is really useful. It sets out very well how our structure in the Bill meets the standards set in the MLETR. I support the clause standing part as we have it before us.
Lord Thomas of Cwmgiedd (CB)
My Lords, I have declared my interests previously in relation to various bodies that deal with maritime law, insurance law and various other aspects of the law.
I thank the Minister for his letter, which was very helpful and clear in summarising all the answers to the various points that have been raised. It has been a pleasure to work in this committee. I think I first saw a bill of lading as a young pupil over 50 years ago. Other members of the committee did not suffer from that disadvantage, so it has been a great pleasure to work with them. I thank them very much for the hard work to which they have been put and for their generosity in the thanks I have received this morning.
I will make one point in the debate on this clause. It is clear that the agreement on UNCITRAL’s model law on electronic trading records marked a significant turning point in the move towards the use of electronic trading documents in shipping and finance. It did so by establishing a common legal regime that will take the place of the common legal regime for paper documents that has evolved through traders, originating in Italy or maybe before then in the Middle Ages. We need to make an immediate change now.
The Bill adopts the MLETR common legal regime for electronic trading documents by adapting the law in the UK so that it is entirely consistent and interoperable with the MLETR regime. Indeed, there would have been no point in bringing forward this Bill if it was not completely consistent and interoperable with the MLETR. Those engaged in international trade will not move to the use of electronic documents unless there is a common legal regime grounded on the MLETR.
In hindsight, it is unfortunate that this was not made clear in the Bill. I hope this point will be noted for future Bills directed to law derived from international bodies that must operate across the world. I hope the Minister can confirm that the sole purpose of the Bill is to make the law in the UK consistent and interoperable with the MLETR.
The evidence that we received was almost unanimous in its strong support for the technical way in which the Bill adapts the law in the United Kingdom. I say that, because we have also looked carefully at Scots law; a project of this kind in future must include the other parts of the United Kingdom. In addition to being entirely consistent with the MLETR, the legal technique employed provides the benefit of building on the existing law developed in international trade largely through the judgments of the English courts, and on this occasion I do mean English. I will say a little more about this when we discuss the issue of possession in the debate on Clause 3.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this Committee stage. I declare my interests, previously declared in the Special Public Bill Committee, as adviser to Circulor, a supply chain traceability business. I also thank the Minister for his extremely helpful letter of 17 February and the clerks and everybody else who helped to make the committee process such a pleasure to be part of, including colleagues on the committee.
The key points on this element, as perfectly set out by the noble and learned Lord, Lord Thomas, are these. Through the careful crafting and drafting, not least by Professor Green of the Law Commission, we have the dual benefits and necessity of interoperability with the MLETR and other states that have adopted it, and all the benefits of common law and the judgments, thus far, of English courts and that similar jurisdiction moving forward. In taking this approach to the adoption of the MLETR into English law, we have that benefit and necessity of interoperability and, as has been stated, hundreds of years of English law opining on this subject. It goes to the heart of the Bill. However, as the noble and learned Lord pointed out, it is probably worth saying, as it is not stated in the Bill, that the sole purpose and intention of the Bill, for want of any doubt or any cloud in anyone’s mind, in this country or internationally, is interoperability with the MLETR and with bringing forward the benefits of English law to that end.
Lord Clement-Jones (LD)
My Lords, this is probably the most positive clause stand part debate that I have had the privilege of speaking in. We have debated the essence and architecture of Clause 2 extensively during the passage of the Bill so far. I thought that our chair, the noble and learned Lord, Lord Thomas, was very tactful in talking about our experience as a committee. The fact is that we had a fairly steep learning curve on trade documents in many respects. He guided us expertly through what we can safely say—interestingly, we had a bit of a history lesson during committee on the Bill—is the biggest change to trade documents since the Venetians ruled the waves.
In particular, these gateway provisions in Clause 2 were examined extremely carefully for their compatibility with the MLETR. One of the issues raised by the noble Lord, Lord Lansley, was about time and place. The Minister’s letter, again, answers that very effectively, so that issue is settled to our satisfaction.
The noble Lord, Lord Holmes, talked about the interoperability aspect. This is crucial, and, again, even though perhaps we do not make enough of that explicitly, it is clearly satisfied by the Bill and needs to be supported on that basis.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am grateful for the consensus of the committee and the opportunity to set out on the record the reasons for the approach that we have taken.
Clause 2 sets out the criteria that a document in electronic form must satisfy in order to qualify as an electronic trade document for the purposes of the Bill. It defines the subject matter with which the Bill is concerned: namely, electronic trade documents. In my noble friend’s explanatory statement to his Motion that the clause should not stand part, reference is made to the provisions of the MLETR and how they are consistent with the structure of the Bill. One area that we did not reach consensus on was whether to refer to the MLETR as the M, L, E, T, R; to pronounce it “Meleeter”; or to refer to it by its full name. However, I am glad that we have had the opportunity to focus on it again today.
The starting point for the Bill has been the following question: what requirements must trade documents in electronic form satisfy in order to be considered capable of performing the same functions as their paper counterparts? Clause 2 seeks to address this question by setting out the criteria that a document must satisfy in order to qualify as an electronic trade document. These gateway criteria are intended to replicate the salient features of paper trade documents, such as being capable of exclusive control and fully divestible upon transfer. An electronic document that satisfies the criteria in Clause 2 is capable of possession and of performing the same functions as its paper counterpart.
Article 10 of the model law sets out criteria that an electronic record must meet in order to satisfy a requirement for a transferable document or instrument—in other words, a paper trade document. A document that satisfies the criteria in Article 10 is an electronic transferable record for the purposes of the model law. In this sense, the MLETR also contains gateway criteria, many of which are closely comparable to those in the Bill.
As I think the committee fully agrees, Clause 2 is fundamental to the Bill and has been carefully drafted to ensure that electronic trade documents can function in the same way as their paper counterparts. The Bill is not intended to be a comprehensive code in relation to electronic trade documents. Rather, it is intended to ensure that electronic documents that satisfy certain criteria, in a reliable way, are legally and functionally equivalent to their paper versions.
As was made clear throughout the committee’s evidence sessions, the structure and the content of the Bill, and Clause 2 in particular, are compatible with the MLETR and with laws in other jurisdictions that have adopted it. It is, however, drafted to cater for the specificities and nuances of UK law, and to take account of feedback to the Law Commission’s consultation paper and draft Bill. So I agree with my noble friend, the noble and learned Lord and others that the salient point here is the interoperability, and I hope that that and the letter I sent to the committee make that clear.
Lord Lansley (Con)
My Lords, my Motion on this clause is similarly to facilitate a short debate. In particular, I was interested in our discussions about why we did not define exclusive control as equivalent in law to possession.
As I understand it, the effect of the Bill is that the control of an electronic trade document may lead to possession of that document in the same way as for a paper trade document. We do not treat the control of paper trade documents as equivalent to possession, but they are capable of possession. Therefore, removing the legal block on the possession of an electronic trade document in statute simply retains in practice the equivalence of paper and electronic trade documents. Defining exclusive control of an electronic document as possession would, as I have now understood, create a legal difference between paper and electronic trade documents, which is contrary to the intention of the model law and, indeed, confusing and unhelpful to those who are using electronic trade documents.
We had interesting discussions about the intention to possess, but the conclusion that certainly I have reached is that although the intention to possess an electronic document may very rarely be an issue, there is case law on possession that would be helpful in the context of the electronic equivalent of a document being forced into a person’s control or their having control unknowingly or unintentionally.
As the Bill stands, and as my noble friend Lord Holmes of Richmond rightly said, we benefit from the existing law on possession, and the Bill as it stands introduces no confusing difference in the legal treatment of trade documents in different forms. With that explanation, I continue to support this clause standing part.
Lord Thomas of Cwmgiedd (CB)
I, too, will add a short word in relation to this point. First, I thank the Minister for making so clear that the purpose of the Bill is consistency and interoperability with the MLETR, and I hope that the message to the Law Commission and to draftsmen in the future is to put that in the Bill.
During our evidence sessions, we spent some time, as the noble lord, Lord Lansley, has so eloquently explained, looking at legal techniques, particularly those employed in Clause 3(1). The technique employed in the Bill enables electronic documents to be possessed, in contradistinction to the legal technique of using exclusive control as the equivalent of possession, as was done in Singapore. It is essential to stress that, for all practical purposes, the result will be the same. Both techniques ensure interoperability under the common legal regime to be established by the MLETR.
We were lucky in both the oral and the written evidence that we received, particularly from the judge in charge of the Commercial Court, Mr Justice Foxton; from Mr Andrew Taylor in his submissions on behalf of the UK branch of the Comité Maritime International, which has done so much to ensure uniformity of maritime law; and from a large body of distinguished academics, including Professor Sir Roy Goode, Professor Louise Gullifer, Professor Miriam Goldby, Professor Alex Mills, Professor David Fox and Professor Andrew Steven, who effectively gave evidence to the same effect: that there was an advantage in the continued use of the concept of possession for electronic trade documents, in contradistinction to simply adopting exclusive control in its place.
Here, trade documents are in a different category from other forms of control over electronic documents and digital assets. The two advantages can be summarised as follows. First, retaining the concept of possession more easily enables the law relating to electronic trade documents to be developed by building on the established law relating to paper documents so carefully developed over the centuries and with worldwide applicability.
Secondly, although in my view this is likely to be of only minimal practical significance, and I certainly hope that it is, there could be an exceptionally rare case in which the requirement of an intention to possess—I would prefer to stick to the English rather than to “animus possidendi”—arising from the continued use of the concept of possession might permit a court to deal in a just way with a case in which something unanticipated has unfortunately gone wrong.
There are those two advantages, but I stress again that the fact that Singapore has chosen a slightly different route to that adopted in the Bill is, for all practical purposes, immaterial to interoperability.
Lord Holmes of Richmond (Con)
My Lords, in many ways, this went to the heart of our discussions in the committee—understandably so, because it is so central to the Bill. In many ways, possession is 9/10ths of the Bill. The position of possession in English law is why it is critical to enable full understanding in this country for those who will seek to avail themselves of this new law when it comes into force with all good speed. It is just as important internationally to enable understanding of why the Bill was constructed around the concept of possession.
Lord Clement-Jones (LD)
My Lords, I will be brief. As all noble Lords described, this approach was overwhelmingly supported by our witnesses to the committee. All of them emphasised that MLETR is a model law, not a prescription for law. Possession of digital documents is absolutely the essence of the Law Commission’s approach to the Bill, and it has been entirely justified. The noble Lord, Lord Lansley, talked about something being capable of possession, which essentially makes this clause a gateway, like Clause 2, leading it to common law to establish possession. This approach was entirely supported by everything that we heard during our inquiry. We fully support that Law Commission approach.
Lord Bassam of Brighton (Lab)
My Lords, clearly, the issue of possession and exclusive control was the nearest we came to controversy in our sessions on the Bill. But the convocation of professors arraigned before us was unanimous in the view that this is the way to approach the issue. The seminars on this which the noble and learned Lord, Lord Thomas, gave us added to our conviction that this was the right way. No doubt, it will establish the benchmark for other jurisdictions to follow.
I have one question. My eye alighted on the word “indorse” in Clause 3(1). Normally, this would be “endorse”. As I understand it—my English is not the best in the world—the difference is pretty marginal, but one relates specifically to financial terminology. I wanted to understand this better, because it is an unusual word that is not often used. Apart from that, I have nothing to add.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am sure that the Bill team behind me, to whom I add my thanks, will provide the legal thesaurus to answer the noble Lord’s question.
It is helpful to have a debate on Clause 3, as it is at the heart of the Bill. It provides that electronic trade documents are capable of possession and are, in all other ways, capable of having the same effect as paper trade documents. As my noble friend Lord Lansley said on the previous clause, this is an opportunity for us to show our working and reflect our helpful discussions in the committee with those who have kindly given evidence.
At several points during our deliberations, questions have arisen regarding the Bill’s approach to possession and exclusive control, particularly in comparison with the approach taken by the model law and Singapore. The Bill’s approach provides that a document that satisfies certain criteria, including being capable of exclusive control, qualifies as an electronic trade document, and that an electronic trade document can be possessed. The Singapore legislation and the model law provide that, if an electronic trade document can be exclusively controlled by a person, and if that person can be identified as the person in control, the document can satisfy a possession requirement. The main distinction between the two approaches is that the Singaporean and MLETR approach conceptualises exclusive control as a functional equivalent to possession, whereas the Bill provides expressly and directly that a document that can be exclusively controlled can be possessed.
The approach taken in the Bill was consciously chosen as the best solution for UK law for several reasons. Allowing the possession of electronic trade documents unambiguously removes the legal blocker currently preventing their recognition. It ensures that paper and electronic trade documents are subject to the same legal rules and laws, including that possessory concepts, such as pledge and conversion, apply to electronic trade documents in the same way they do to paper trade documents. This approach avoids the need fundamentally to rethink existing concepts of possession in respect of intangible assets, and it achieves equivalence with paper documents in a straightforward manner that is easy to understand for British businesses and global trade.
It is crucial for market certainty that electronic trade documents are able to plug directly into the existing legal framework applicable to paper trade documents. This identical treatment, irrespective of whether a document is in paper or electronic form, is particularly important, given the provisions in the Bill allowing for a change of medium, which are necessary to give parties flexibility as the industry seeks to effect the transition to electronic trade documents that we want to see.
Applying the concept of possession directly also preserves the role of intention in relation to electronic trade documents as it applies to paper. Intention is an important element of possession in UK law, and, as we heard in the oral evidence we received, it is possible to conceive of a situation in which a party has exclusive control of an electronic trade document but not the intention necessary for possession. Intention is relevant to determining who has possession of a paper trade document, and it should be equally relevant to the same documents in electronic form.
Possession is a common law concept with a significant and hugely valuable pedigree. The Bill in general, and Clause 3 in particular, is carefully worded to take advantage of this without risking the integrity of a well-established and foundational common law concept. Taking a different approach would require a fundamental reworking of the Bill.
Furthermore, the Bill deliberately does not define what it means to have possession of an electronic trade document. The Bill is concerned with features that an electronic trade document must exhibit in order to be possessable, and it includes a notion of control for this purpose only, rather than identifying who is in possession of it as a matter of fact or law, or both. Leaving the latter inquiry to the courts and common law is the preferable course of action. The common law has proven itself highly flexible and adaptable in this regard: existing common law has developed a range of tools to assist in determining what is, and who has, possession of a tangible asset at any particular time. This could include the related concept of constructive possession, which was raised in our evidence sessions as an important concept.
Although the common law of possession may need to be adapted in order to accommodate electronic trade documents, this is achievable without an explicit account of its relationship with control. This is largely because control is one of the two elements of possession as a matter of fact of common law.
Anyone with the ability to exercise control over an electronic trade document, such as anyone with knowledge of the private key or other security credentials, could thereby claim to have control and in turn a claim to possession. Where multiple people have competing claims to possession, existing rules on relativity of title will apply to determine the superior interest in any given situation.
The noble Lord asked about indorsement. It means an annotation in writing on the back of a paper trade document instructing that the obligation recorded therein be performed to the order of the person named in the indorsement or simply to order, which is called a blank indorsement. This instruction must be signed, and is usually completed by delivery. If the indorsement is a blank indorsement, the possessor of the document, whoever they may be, may indorse it in their turn. If the indorsement is to a named person, any subsequent indorsement must be by that person. It is an essential part of the transfer of many trade documents and any rights that attach to them. There is a business practice of indorsing paper documents on their reverse, which reflects that “indorsement” comes from the Latin “dorsus”, meaning back. The term is also used in the Bills of Exchange Act. I am glad that we have continued our learning process in this session.
Finally, on the subject of functional equivalence, it is worth noting that although Singapore is a common-law jurisdiction, it has diverged from the UK in the context of electronic communications and electronic commerce, where it has adopted other UNCITRAL model laws and the UK has not. The language of the MLETR might therefore be more compatible with Singapore’s existing law than it is with the UK’s. Its implementation without adaptation may raise fewer difficulties of interpretation there than it would in this jurisdiction. As the noble and learned Lord, Lord Thomas, said, different countries may take different approaches, but to all intents and purposes we are striving for the same ends.
As English law is the foundation of international trade, this Bill will put us ahead and in the lead not only of the G7 countries but of almost every other country in the world. The UK is setting the approach which all other jurisdictions will seek to follow, not just on the digitalisation of trade documents but on the future digitalisation of all trade, towards which this Bill is an important but merely foundational step.
Lord Lansley (Con)
My Lords, I apologise for delaying the committee again, but I want to reference an issue that concerns me in relation to Clause 4. If a change of form is not carried out correctly, and if the electronic document is a valid document in itself but does not include the statement that the document has been converted from a paper document, the paper trade document to which it relates may not be cancelled and, as paragraph 82 of the Explanatory Notes suggests,
“this could lead to a duplication of the promisor’s obligation.”
Should we exclude this possibility?
In his helpful letter last Friday, the Minister said that the approach in the Bill is better than the alternative. If the alternative was to treat an electronic trade document as invalid if the statement in subsection (1)(a) is not included, and the paper document is none the less withdrawn—as one would expect in most cases, because the paper trade document is withdrawn when the electronic trade document has been created, and the mistake has been made—there may be no valid document at all, which is obviously problematic for a bill of lading, for example, about which we have learned a reasonable amount.
Also, persuasively, the Minister rests his argument on the reliable systems used for the creation of an electronic trade document. As we discussed with a number of witnesses, these are not infallible, but the opportunity to reduce fraud and enhance the integrity of trade documentation, including the reduction of error, using new and reliable electronic systems is now overtaking the reliability of a paper-based system as well as reducing cost, time and resource implications. So although I flag up this issue, I accept that the clause should stand part as is.
Lord Parkinson of Whitley Bay (Con)
I am grateful to my noble friend for flagging this area. Unless the committee wishes, I will not repeat the information that I provided in my letter of 17 February, at the bottom of page 4 and the top of page 5, but I am glad to be able to put it on record as my noble friend has allowed us to do.
Lord Thomas of Cwmgiedd (CB)
I will first say a word of thanks to the Law Commission, and to Professor Sarah Green in particular, for the excellence of its work. It is also right to thank those who submitted evidence in writing to us and those who gave oral evidence at quite an early hour on a Thursday morning. We were fortunate about the timing, in that we had the opportunity to request written evidence with the hiatus of Christmas. Although that may have made some people spend more time over Christmas on the interesting subject of bills of lading than they would have liked, it enabled us to start our oral evidence with a very firm body of written evidence. Having to compress it all into the usual 28-working day period may not have been to anyone’s advantage. I hope that the opportunity will be taken to think again about the procedure for written evidence; we certainly found the accident of what happened highly beneficial.
However, that benefit would not have been achieved without the great diligence of our clerk, George Webber, and his assistant, Louise Andrews, who laboured mightily to get the evidence in and to make so many phone calls in a very short period to ensure that we had a full book of evidence. I also thank them for organising all the transcripts and other documents. A special thanks is due to them both. I am sure I speak on behalf of everyone in saying how grateful we are.
Having said all that by way of thanks, I ought to temper it by saying that the work of the Law Commission, diligent and hard-working though it was, is the easy part of the process with which this Bill is engaged. Our part in this very agreeable committee has been very easy. As experience always shows, it is easy to change the law. The difficult bit is getting people to use it and move. It is important to stress that the formidable task lies ahead: changing the habit of centuries. However, there is a huge prize here and I am sure that we will get there.
First, I am confident that His Majesty’s Government will do all they can to publicise to other Governments the move that the United Kingdom has made to adapt its law so as to be based on interoperability under the MLETR. I was greatly encouraged by the evidence we received on what other states are setting about doing, and by discussions I had with another major trading state last week on the steps it has taken and the benefit it has had from seeing what we are doing. The UK has set an excellent example of the way forward and we should not be reticent and hide our light under a bushel.
Secondly, banks and others engaged in providing finance need the utmost encouragement to assist in the use of electronic trade documents. I am again encouraged by the position taken by one bank, Barclays, whose letter to us after the evidence session made clear its wish to encourage the use of digitalisation. I should add that that is not the message I have received in respect of all banks, so HMG have a great deal of work to do.
Thirdly, we can be very confident that the ICC will continue to play a prominent role. We have been particularly fortunate in the UK because of the work done by Chris Southworth, but I have also learned that people are hard at work elsewhere. It is also encouraging that moves are under way to establish a trade digitalisation taskforce, involving His Majesty’s Government, the ICC and banks. I wish it well.
However, despite all of these encouraging signs, the task is formidable. The Government must lead with great determination and energy to ensure that the UK’s leadership in getting the Bill enacted is carried through to leadership in getting those engaged in international trade to adopt electronic documents through a common legal system based on the MLETR. The prize is enormous, and it was interesting to see that even net zero is shown to benefit from getting rid of paper in this enterprise. So although the task for the Government is huge, a lot of favourable winds are behind it.
Lord Holmes of Richmond (Con)
My Lords, like the noble and learned Lord, Lord Thomas, I thank everyone involved in getting the Bill to this stage, not least Professor Green and her team at the Law Commission, our clerks and team here in the House and everyone who has been involved. As a committee, we benefited hugely from the expert and excellent chairmanship of the noble and learned Lord, Lord Thomas, with all his legal experience in this space, not the least of which was an interesting case, which he recounted to the committee, involving a large consignment leaving the port of Bordeaux. All the committee members’ ears pricked up at that point, only to prick down, if ears can do so, when it turned out that the consignment was grain, rather than any product from the right or left bank of the Gironde that may perhaps have been of more interest.
The noble and learned Lord, Lord Thomas, set out the point absolutely clearly: that the Bill demonstrates what we can do when we combine common law with our new technologies. It is right that we conceive of blockchain, distributed ledger technology, AI, machine learning and all the new technologies as tools. They are incredibly powerful and may be incredibly positive, but they are still tools that we humans have to determine how to deploy.
The Electronic Trade Documents Bill is a trade-enabling, trade-empowering Bill, through the potential of electronic trade documents. In reality, however, it is at its heart a new technologies Bill—new technologies in combination with English common law, brought to bear in the area of international trade in this instance.
As the noble and learned Lord, Lord Thomas, pointed out, the most important stage is after Royal Assent, when the hugest sales job must, rightly, be done on the Bill to get traders in this country, banks and other people involved in the international trade business, like insurers, to very much get behind and use electronic trade documents. Rightly, the Bill is permissive rather than mandatory. That is quite correct, but it means that this sales job must be done.
Secondly, this sales job must be done, rightly, through His Majesty’s Government in all the international fora —through bilaterals, trilaterals and all means—to demonstrate to other nation states the benefit of incorporating MLETR into their domestic legislation. To put it plainly, what purpose would the UK passing the Bill have if other nations have not taken MLETR into their legislation and enabled that international trade, which can be done in seconds rather than days?
As the noble and learned Lord, Lord Thomas, perfectly pointed out, the benefit to the environment and net zero should not be missed in any sense here. Currently, in trade, it may take seven to 10 days for a bill of lading document to be transferred to enable a shipment to move. This was illustrated so clearly during Covid, when the planes were grounded at London Heathrow with the trade documents on board and the ships queued up outside the Port of Singapore, unable to move for want of that physical document, which is so painfully papery. The Bill perfectly addresses that, enabling not only settlement in seconds but all that carbon, which would have been wasted in flights and timing, being wiped away through the implementation of the Bill.
Can my noble friend the Minister therefore say whether he will ensure that there is real cross-department and cross-Whitehall consideration not just of what we have learned through the Electronic Trade Documents Bill process but of how we can look to every possibility, in every potential context, to combine common law with the new technologies available, for the benefit of citizen and state alike?
Lord Clement-Jones (LD)
My Lords, I was struck by the Minister saying that today’s stand part debates are an opportunity to show our workings. He is admirably qualified to be a Science Minister on that basis.
I add my thanks to the Law Commission, to our witnesses for both their oral and written evidence, to the clerks and staff on the committee in particular and, overwhelmingly, to our chair, the noble and learned Lord, Lord Thomas, who has guided us so carefully and successfully through the thickets of the MLETR and the common law. I very much hope that the Minister and the House authorities more generally will take note of our chair’s comments on the procedure and the serendipity of the fact that we had time successfully to get the evidence and so on. If we had not had the intervening period of Christmas, this would have been extremely difficult.
I fully endorse—as opposed to indorse—what the chair said about the hard part being the practical application and adoption of the Bill. He mentioned the letter from Barclays, which is worth a little consideration because it is very encouraging. It came in rather late, but it expresses quite an appetite from its customers for the Bill, which bodes well:
“Our customers want trade to be simpler, faster and more digital, enabling them to complete trade deals in hours and days rather than weeks and months … The security and compliance of trade will also be strengthened through the proposals in the ETD Bill … The proposals in the ETD Bill will also result in a significant reduction of the estimated 25 billion paper documents generated and couriered around the world each year”—
the noble Lord, Lord Holmes, made this point. That net-zero aspect is extremely important in all of this. The letter says,
“Overall, we are confident that the … Bill will be a positive boost to UK trading”.
On implementation, the Barclays letter picks up the point about the new trade digitisation task force. It would be useful if the Minister could give us a little more information about that, if he has any, particularly in relation to some of the points raised by the noble Lord, Lord Holmes, on the duty or opportunity for the taskforce to encourage the adoption of new technologies, which will of course be absolutely crucial. The letter, again, stresses the need for UK leadership, so the trade digitisation task force will clearly have an international engagement duty. It would be useful if the Minister could unpack that a little so that we know that the Law Commission’s work, which we carried on, will bear fruit in due course.
We very much hope to see that the Bill has all the advantages set out in that Barclays letter.
Lord Bassam of Brighton (Lab)
My Lords, I add my thanks to the committee clerks, the noble and learned Lord, Lord Thomas, the Minister and other colleagues who have aided the performance of the committee’s duties. They have done a first-rate job and made the subject matter much more accessible to those of us who are simply lay people trying to comprehend it.
I will build on the point made by the noble Lord, Lord Holmes. We have all expressed the view that this piece of legislation provides a platform for us to build on as a nation in leading the world in the development of electronic trade documents. This is a question for the Minister, because we need to understand what sort of strategy the Government will put in place to ensure that we reap the benefit of that. If we are there with Singapore and just one or two others, that suggests that the scope for using this legislation is currently rather narrow, yet we understand and regularly hear from Ministers that we are in negotiation with other nation states on trade deals; we have had Australia and New Zealand pretty recently, and there is sometimes discussion about a trade deal with the US.
It seems to me that this activity should be linked to the development of electronic trading. Perhaps we should have a strategy document brought before us at some point; we would certainly benefit from a debate on the whole topic, because there is no point in having good legislation if the world is still indulging in a paper trail. The noble Lord, Lord Clement-Jones, referred to 25 million paper documents, and the Explanatory Notes set out and describe just how vast this assault on the world of paper is. There will be a massive paper saving if we can get this right, which would have a big environmental benefit for the future. Can the Minister give us a couple of ideas about the Government’s thinking on this and maybe at some later stage bring forward the opportunity for us to debate the issue more widely?
Lord Davies of Brixton (Lab)
My Lords, I thank everyone who has helped the committee in its work. It has been an education. I have learned a great deal about electronic trade documents; I suspect it will not be of great assistance in my future career, but there is some value in the context of all our discussions about the internet. Learning about the Special Public Bill Committee process has been of particular value, and I take on board the comments of the noble and learned Lord, Lord Thomas, about how the approach could be improved. My thanks to everyone.
Lord Parkinson of Whitley Bay (Con)
My Lords, Clause 7 sets out the territorial extent of the Bill, so this is an opportunity for me to say a little about that, as I touched on in my letter of 17 February.
As we heard during the evidence sessions, timing and resourcing meant that, unfortunately, it was not possible for the Scottish Law Commission to work collaboratively on this project, but the Government have taken every opportunity to ensure that the Bill works across our devolved legislatures. On Scotland specifically, the Government have undertaken significant legal work, including by engaging independent legal counsel, to analyse and ensure the compatibility of the Bill with both English and Scots law, including that related to the Moveable Transactions (Scotland) Bill currently before the Scottish Parliament.
Following one of our evidence sessions, I corresponded with Professor Andrew Steven, who queried whether Clause 3(4) was necessary. In his response, he acknowledged our thinking behind its necessity and agreed with our approach. I will ensure that the Explanatory Notes that support the Bill are updated to provide further information on this matter. The Government are working closely with the Scottish Government to secure legislative consent from the Scottish Parliament. To be clear, this may require minor amendments to the delegated powers in the Bill to ensure that areas of reserved and devolved competence are satisfactorily covered.
The remaining parts of Clause 7 make provision about the coming into force of the Bill and it having prospective effect only. It also sets out the Short Title of the Bill. It will come into force two months after the day on which it is passed. Clause 7(3) ensures that an electronic trade document issued before the Bill comes into force cannot be possessed, indorsed or converted into a paper trade document. It also ensures that it is not possible to effect a change of form or medium under the Bill from paper to electronic if the paper trade document was issued before the Bill came into force.
Following the Bill being passed, many of the precise steps taken to implement and fully harness the benefits of the Bill will be for business and industry to determine. That is consistent with the approach taken throughout the Bill; it does not mandate the use of electronic trade documents but is a facilitative Bill. However, as we heard in our evidence sessions and as the noble and learned Lord, Lord Thomas, said again today, there are favourable winds and great enthusiasm from UK businesses for this important change. Businesses stand ready and eager to support the delivery of the Bill, which will benefit businesses of all shapes and sizes.
However, there is certainly a role for government to play here, not just my department but across His Majesty’s Government. For example, a memorandum of understanding has been agreed as part of the Singapore digital economy agreement, through which the Government are working in partnership with the International Chamber of Commerce on a pilot project intended to improve the interoperability between the UK and Singapore’s electronic trade documents framework. I mentioned in our evidence sessions the role that we played through our presidency of the G7 to encourage other jurisdictions to follow in this important area. We will continue to work alongside international bodies such as the ICC to assist that and support businesses to benefit from this UK legislation. We will work across government to ensure that this change is communicated.
The noble Lord, Lord Clement-Jones, asked about the Digitisation Taskforce chaired by Sir Douglas Flint. That was launched by the Chancellor in July 2022 to drive forward the modernisation of the UK’s shareholding framework. In particular, Sir Douglas has been asked to identify immediate and longer-term means of improving the current intermediated system of ownership, eliminate the use of paper share certificates for traded companies, mandate the use of additional options to cheques for cash remittance and consider whether the arrangements for digitisation can be extended to newly formed private companies and as an optional route for existing UK private companies. His Majesty’s Treasury leads on that work, so it may be better for Treasury Ministers to provide further information in the debates which noble Lords rightly say may prove useful.
In closing, I echo the thanks given to the Law Commission, particularly Professor Sarah Green, to George Webber and Louise Andrews, who have supported the committee’s work admirably, and to all those who gave evidence. I acknowledge the point made by the noble and learned Lord, Lord Thomas, about the difficulties imposed by the timetable of the Special Public Bill Committee process; we are all the more grateful that they sent us that evidence, which informed our discussions. I am also grateful to the members of the Bill team from across a number of departments who have supported our work.
I underline the point that all members of the committee have made and which has underpinned our discussions from the outset: that this small Bill has enormous potential to place the UK at the forefront of international trade as a thought leader for others to follow, and that it can bring significant benefits to British businesses, making it easier to sell internationally as well as cheaper, faster and more secure. It has been a privilege to work on it with the rest of your Lordships’ committee, and I hope that it will become law very swiftly.
Lord Bassam of Brighton (Lab)
I caught what the noble Lord said about the Treasury. Am I correct in understanding him to say that the Treasury will be in the lead in developing a post-Bill implementation strategy, rather than the noble Lord’s own department? I can understand why, strategically across Whitehall, it might not be DCMS, but will it be the Treasury rather than the departments that are responsible for business and for trade?
Lord Parkinson of Whitley Bay (Con)
There is important work for both the Treasury and the new Department for Business and Trade. Obviously, throughout the passage of the Bill, the machinery of government changes have meant that many of these responsibilities have moved, but throughout the work on the Bill I have benefited from the support of officials in a number of departments, and His Majesty’s Treasury and the Department for Business and Trade play a key role here. It will not fall to DCMS, as newly constituted, to carry on that work, but, as I say, the work has been a cross-government endeavour hitherto and will remain so.
Electronic Trade Documents Bill [HL]
Tuesday 14th March 2023
(1 year, 1 month ago)
Lords ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Amendment Paper: HL Bill 57-I Marshalled list of amendments for Special Public Bill Committee - (16 Feb 2023)
Electronic Trade Documents Bill [HL]
Wednesday 22nd March 2023
(1 year, 1 month ago)
Lords ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Amendment Paper: HL Bill 57-I Marshalled list of amendments for Special Public Bill Committee - (16 Feb 2023)
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
My Lords, on the basis that the focus of the Bill is on modifying the private law of property, which is generally devolved, we are seeking a legislative consent Motion from the Scottish Parliament. We continue to work closely with officials in the Scottish Government to ensure that we receive legislative consent from the Scottish Parliament for this Bill.
Lord Parkinson of Whitley Bay (Con)
My Lords, I will briefly take this opportunity to thank all noble Lords who have shown an interest in, and support for, this Bill. It was a Law Commission Bill, scrutinised through the Special Public Bill process, so I thank in particular the noble Lords who sat on the Special Public Bill Committee which examined it. It was chaired most ably by the noble and learned Lord, Lord Thomas of Cwmgiedd, and benefited from the membership of the noble Lords, Lord Bassam of Brighton, Lord Clement-Jones and Lord Davies of Brixton, and my noble friends Lord Holmes of Richmond, Lord Lindsay and Lord Harlech. Our work was admirably assisted by our clerk, George Webber. I thank him and all those who gave evidence to the Committee.
Apart from the minor changes made to apply this critical legislation to the whole of the UK, the Bill before your Lordships remains the work of the Law Commission, so I record my thanks to Professor Sarah Green and her colleagues at the commission, Laura Burgoyne, Daniella Lupini and Siobhan McKeering, for their diligent work. I also thank Oliver Tones, the Bill manager, and Bobby Lawson, his deputy, along with the Committee’s government lawyers who have contributed to this, specifically Simon Brandon, Louise Dennison and Chris Callan, as well as Nausheen Khan from my private office.
This Bill has global transformational potential and will place the United Kingdom at the forefront of international trade as a thought leader for others to follow. One witness who appeared before the Special Public Bill Committee, when asked what, if anything, he would change about it, said:
“The only thing that I miss is the change from the word ‘Bill’ to the word ‘Act’.”
I hope that that change can be brought about swiftly. I beg to move.
Lord Thomas of Cwmgiedd (CB)
My Lords, may I add one word of thanks to the Minister and all the members of the Committee? I am afraid they had to work quite hard learning something that I had the disadvantage, probably, of having done for more than 50 years. The House also ought to thank so many from the industry, academia and the court who gave evidence to us because we scrutinised the work of the Law Commission to make certain that the Bill would meet the demands of international trade and, particularly, the convention produced by UNCITRAL to which this Bill gives effect. I thank all the members of the Committee again.
Lord Clement-Jones (LD)
My Lords, I add my thanks to those of the noble and learned Lord, Lord Thomas of Cwmgiedd. I certainly learned a great deal about the Law Commission process for scrutinising Bills, and a lot of that was due to the fact that the noble and learned Lord, Lord Thomas, was an expert and wise chair of our Committee. Great thanks are due to him and to the Minister. It is rather unusual to have a Minister sitting in on the Committee, but he was very welcome nevertheless, along with the noble Lord, Lord Harlech. I also thank the other members of the Committee who kicked the tyres very effectively on the Bill. Of course, I particularly thank Professor Sarah Green and the Law Commission.
The whole purpose of the Bill is to make digital trade a reality. We sometimes think that our job is done when a Bill goes through and we can think about something else, but it is important that progress is made on the single trade window which will result from this Bill. Can the Minister tell us when the first phase of the single trade window might happen? Will it happen in November 2023? After all, it is a very important part of what we should expect. It is quite complex. It is described as a multi-department programme, which probably sends quivers down the spines in Whitehall. It would be very good to hear that the Bill is going to come into effect very quickly and will lead in the very short term to greater digital trade, but it is a very good Bill and we have scrutinised it pretty effectively.
Lord Bassam of Brighton (Lab)
My Lords, it falls to me to add my general congratulations to the Minister, to the noble and learned Lord, Lord Thomas, for his work on this, to the Bill team and the advisers who were behind them and, in particular, as the noble Lord, Lord Clement-Jones, said, to Professor Sarah Green, who led the way in the evidence and cleared a great pathway for us. The Law Commission should be congratulated on constructing this legislation to which none of us wanted to effect an amendment, and we succeeded in that through many hours of deliberation and consideration, so that is something to be proud of in itself.
I want to add to a point the noble Lord, Lord Clement- Jones, usefully began. Many Bills meander their way through Parliament and disappear, sinking without a trace. I suspect this Bill might do that as well, but it does not deserve to. This is a really important piece of legislation which we should not just be proud of but make something of. Some estimates suggest we can save something like 50% in costs by moving to forms of electronic trade. That is not to be sniffed at in an intensely competitive international trading world. This piece of legislation, which puts us in the lead on electronic trade, is something we should celebrate.
I raised in Committee with the Minister that we should ensure we have a strategy which means that this Bill gets the opportunity to do what it says it is about: facilitating electronic trading. I asked the Minister about this when we were in Committee. He said:
“Following the Bill being passed, many of the precise steps taken to implement and fully harness the benefits of the Bill will be for business and industry to determine.”
That is fine, but we need a clear pathway and strategy from the Government for us to be able as a trading nation to reap the benefits of this legislation. I would like to hear from the Minister—it is something I am sure the House will want to come back to at some point—what that strategy might look like. He later said that there is
“a role for government to play”,—[Official Report, Electronic Trade Documents Bill [HL] Special Public Bill Committee, 20/2/23; col. 17.]
which is the case. However, we and Singapore are the only two trading nations with the benefit of this legislation in prospect.
I congratulate the Government on bringing this forward. It is a fine piece of legislation. It may not be controversial, but it is potentially of great value. I hope this Government can aspire to give this piece of legislation the value it deserves.
Lord Parkinson of Whitley Bay (Con)
I am very grateful to the noble Lords, who have given the rest of your Lordships’ House a brief snapshot of the good scrutiny the Bill received through the Special Public Bill Committee. It may be unamended, but it is certainly not unscrutinised. I am very grateful to all the other members of the Committee for the work that they did and, as the noble and learned Lord, Lord Thomas, rightly said, to all the academic experts, those from the legal profession and, crucially, from the industries which stand to benefit the most and came to give evidence before the Committee. All of that was much appreciated.
The noble Lord, Lord Clement-Jones, asked about the single trade window. It falls to colleagues at His Majesty’s Revenue and Customs. If I may, I will direct the question to them and furnish him with an answer on the single trade window. Both noble Lords are right that there is work to be done across government. Colleagues at the Department for Business and Trade and at the Department for Science, Innovation and Technology will take the Bill forward in another place.
As noble Lords have heard me say before, through our presidency of the G7 recently and our role jointly chairing the Commonwealth digital connectivity cluster, we are in international fora encouraging other jurisdictions to follow our lead in this area to align with the model law and avail themselves of these opportunities. They are significant for industry in terms of the simplification and speeding up of trade, the environmental impact and resilience when it comes to unforeseen things such as the pandemic, which brought into relief the importance of this Bill.
This Bill is facilitative, but it will put the UK ahead not only of the G7 countries but almost the whole world. I am very proud that we are setting the approach which other jurisdictions will seek to follow. With gratitude to noble Lords who have scrutinised the Bill in your Lordships’ House, I beg to move that the Bill do now pass.
Electronic Trade Documents Bill [ Lords ] (First sitting)
Monday 19th June 2023
(10 months, 2 weeks ago)
Public Bill CommitteesRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 19 June 2023 - (19 Jun 2023)
The Chair
I have a few preliminary points. Please switch off electronic devices or turn them to silent. Hansard Reporters would be very grateful if Members emailed them their speaking notes.
Clause 1
Definition of “paper trade document”
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
It is a pleasure to serve under your chairmanship, Dame Angela. Clause 1 defines the type of trade documents that may fall within the scope of the Bill. It does so by setting out the criteria that the documents must satisfy. The list of documents included is intentionally broad to ensure that when the trade market uses a document in such a way that possession of it is significant—even if that is a matter of commercial practice, rather than law—it can be confident that it is regarded as being possible to possess it.
Patrick Grady (Glasgow North) (SNP)
I am keen to welcome the provisions giving legal recognition to electronic trade documents. It is clear from all the evidence and research behind the Bill that digitalisation of the documents listed in the clause will help to speed up transactions and lead to significant cost savings and efficiencies. The Government claim that they are ahead of other G7 countries in introducing these changes, but I wonder whether this does not all still smack a bit of yesterday’s technology solving today’s problems tomorrow, rather than tomorrow’s technology solving those problems today. With the rise of artificial intelligence, I wonder how soon some of the processes that we are talking about will be conducted with very little human interaction.
The clause provides the foundation for the rest of the Bill by setting out the definition of “paper trade document” and all that follows from that. The Scottish Government had some concerns about the Bill, but I will come on to those a little later.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Definition of “electronic trade document”
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause defines the criteria that a trade document in electronic form will need to meet to fall within the scope of the Bill, and therefore to be legally equivalent to a paper document.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Possession, indorsement and effect of electronic trade documents
Question proposed, That the clause stand part of the Bill.
Paul Scully
This clause provides that a person may possess, and part with possession of, an electronic trade document. It removes the legal blocker that prevents trade documents in electronic form from being possessed, and therefore from having the same legal status as paper trade documents. The clause is fundamental to ensuring that there is equivalence between the two, which is needed if we are to meet our policy aims.
Alex Davies-Jones (Pontypridd) (Lab)
I rise briefly to endorse what the Minister says about the Bill. It is incredibly important, particularly post Brexit, when red tape has significant consequences for our ability to trade with the rest of the world. We welcome the Bill.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Change of form
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause provides the change of medium or form of a trade document—that is, it allows for the conversion of a paper trade document to an electronic one, or vice versa.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Exceptions
Paul Scully
I beg to move amendment 1, in clause 5, page 3, line 24, leave out “Secretary of State” and insert “appropriate authority”.
This amendment provides for regulations under clause 5(2)(b) to be made by the appropriate authority. The appropriate authority is defined by Amendment 4.
The Chair
With this it will be convenient to discuss the following:
Government amendments 2 to 5.
Government new clause 1—Regulations under section 5.
Paul Scully
Clause 5 contains an opt-out provision that allows industry participants to design their documents so that they are not caught by the Bill and are not possessable if they prefer to do business using other contractual arrangements or legal mechanisms. An express opt-out provision is not required and it will be enough if it can reasonably be inferred that it is not the intention that possession should apply. We have drafted the provision carefully to be limited to documents used in trade to which possession is relevant, allowing an opt-out where it is clear from the document or practices around its use that possession is irrelevant.
The Bill includes a delegated power in clause 5(2)(b) that will enable the Secretary of State to specify further types of documents or instruments that are outside the scope of its substantive provisions, in addition to uncertificated securities already cited in clause 5(2)(a). There is a further delegated power in clause 5(3) that enables the Secretary of State to amend or remove the exception in clause 5(2)(a). In acknowledgement of the Bill’s potential to spur further digitalisation of documents and related practises, the power may need to be exercised in circumstances where it is determined that a type of document or instrument that falls within the scope of the Bill requires more bespoke provisions to allow for its digitalisation, or where a type of document or instrument should not be capable of being used in electronic form.
On the amendments, the Government’s intention has always been that the Bill should apply UK-wide, and we have already agreed with our colleagues in Northern Ireland that the Bill does not require their consent, given that it deals with a reserved matter. The Welsh devolution settlement restricts Senedd Cymru from making changes to private property law, and we have agreed that legislative consent is not necessary in this case.
In the case of Scotland, private property law is a devolved matter and we have requested a legislative consent motion from the Scottish Parliament. We have worked with officials, and I know that Scottish Government Ministers have been advised to support that. I hope that we will continue to work to ensure that that happens. We want to consider the matter further and to have belt and braces, so we also consider it prudent to confer the power in clause 5(2)(b) on Scottish Ministers, both to exercise the power alone within areas of devolved competence and to act jointly with the Secretary of State. By including the option for Scottish Ministers to act alone and jointly, the delegated powers can be exercised in a flexible manner that best suits the prevailing need for secondary legislation. Moreover, it prevents any future uncertainty as to whether matters are within the devolved competence of Scottish Ministers, particularly if they cut across devolved and reserved matters.
The requirement in clause 5(4) for the Secretary of State to consult Scottish Ministers before exercising the power in clause 5(2)(b) will be disapplied in circumstances when the Secretary of State and Scottish Ministers act jointly to make regulations. As noted earlier, although the need for amendments to the Bill in the future is unlikely, we believe that such changes are best delivered through concurrent delegated powers that will allow both the Secretary of State and Scottish Ministers to make those changes. The proposed amendments will therefore enable Scottish Ministers to make such regulations when all the provision is within Scottish devolved competence and to act jointly with or be consulted by the Secretary of State in other cases.
The delegated powers previously afforded to the Secretary of State by the Bill are not substantively affected by the amendment, so we have tabled new clause 1 to provide for regulations under clause 5 to be subject to the affirmative resolution procedure at Westminster and in the Scottish Parliament. In addition to those two substantive amendments, we have had to include four consequential amendments to update and correct cross-references. I hope that colleagues will acknowledge the requirement for amendment 1 to change the appropriate authority, and the consequential amendments that allow that amendment to be inserted into the Bill.
Alex Davies-Jones
I have just a brief question for the Minister. In the Second Reading Committee, I pressed him on where the responsibility for the Bill would sit. I would appreciate it if he would put on the record exactly which Secretary of State will have responsibility for and oversight of the Bill.
Patrick Grady
I echo the point made by the Labour Front Bencher. This is a Law Commission Bill being taken forward by a Minister from the Department for Science, Innovation and Technology on matters largely overseen and regulated by the Department for Business and Trade. A little clarity about exactly which Secretary of State is referred to in these clauses would be helpful.
The Scottish Government welcome the Bill in principle, but the initial legislative consent memorandum set out a number of concerns about the powers granted to UK Ministers to legislate in devolved areas, particularly without the requirement for consent from Scottish Ministers or Scotland’s Parliament. The amendments tabled by the Minister go some way towards addressing that, so the supplementary legislative consent memorandum published by the Scottish Government on 13 June sets out:
“While the amendments proposed by the UK Government do not provide a full statutory consent provision, on balance, the Scottish Government recommends that the Parliament grants legislative consent”.
That is because
“The policy objective of the Bill is strongly supported by both the Scottish Government and stakeholders…there is no current legislative opportunity at Holyrood to make equivalent provision for Scotland, and any such legislation would not be as comprehensive as the UK Bill…the power involved is extremely limited, and unique to this law reform Bill…the aim is to ensure consistency in a mutually agreeable and workable way and that in practice it is highly unlikely for Scottish Ministers to want different arrangements for trade documents to apply in Scotland.”
It is welcome that the Minister has been able to table amendments that will allow Holyrood to agree to the Bill, but I wonder slightly whether this could not have been foreseen. Scottish Government Ministers and, indeed, those of us who represent the SNP in this House, have for several years expressed our concern at increasing overreach by UK Ministers into devolved areas, especially in the context of Brexit. There was quite a lengthy consultation before the Bill was published, so quite why none of this appears to have occurred to Ministers before we got to the Public Bill Committee right at the end of a Bill that started in the House of Lords is slightly beyond me. However, consensus does, for once, appear to have been reached. These amendments will make the Bill much more palatable, so that should ease its remaining stages both here and in Holyrood.
Paul Scully
I am glad that we were able to get there by the end. The Government have undertaken significant legal works, including by engaging independent legal counsel to analyse and ensure the compatibility of the Bill’s provisions with both English and Scots law, including that related to the Moveable Transactions (Scotland) Bill currently before the Scottish Parliament. I am glad that we got there in the end, ensuring that we talk and agree as best we can. I can confirm that the Secretary of State for the Department for Business and Trade will be exercising this power.
Amendment 1 agreed to.
The Chair
If I perceived correctly, the Minister has already amendments 2 to 5—am I correct?
The Chair
It is normally helpful if the amendments are moved at the appropriate time. Otherwise, we will get ourselves in a bit of a mess. I recognise the Minister’s enthusiasm, but perhaps we could keep to the selection of amendments; everyone will then be able appropriately to follow what is going on. Given what the Minister said, unless anyone objects, I intend to deem those amendments moved in the previous debate.
Amendments made: 2, in clause 5, page 3, line 29, at end insert—
“(4A) Subsection (4) does not apply if the regulations are to be made by the Secretary of State and the Scottish Ministers acting jointly.”
This amendment provides for the requirement for the Secretary of State to consult the Scottish Ministers before making regulations not to apply where the regulations are to be made jointly by the Secretary of State and the Scottish Ministers.
Amendment 3, in clause 5, page 3, line 31, leave out paragraph (a).
This amendment removes provision that is replaced by the new clause inserted by NC1.
Amendment 4, in clause 5, page 3, line 32, at end insert—
“(5A) ‘The appropriate authority’, in relation to regulations under subsection (2)(b), means—
(a) in any case, the Secretary of State or the Secretary of State and the Scottish Ministers acting jointly;
(b) in a case in which all of the provision made by the regulations is within Scottish devolved competence, the Scottish Ministers.
(5B) Provision is within Scottish devolved competence if it is provision which would be within the legislative competence of the Scottish Parliament if contained in an Act of that Parliament.”
This amendment provides for the power to make regulations under clause 5(2)(b) to be exercisable by the Secretary of State, the Secretary of State and the Scottish Ministers acting jointly or (where the regulations only make provision in devolved competence) by the Scottish Ministers acting alone.
Amendment 5, in clause 5, page 3, line 33, leave out subsection (6).—(Paul Scully.)
This amendment removes provision that is replaced by the new clause inserted by NC1.
Clause 5, as amended, ordered to stand part of the Bill.
Clause 6
Consequential provision
Question proposed, That the clause stand part of the Bill.
Paul Scully
Clause 6 provides for consequential changes to the Bills of Exchange Act 1882 and the Carriage of Goods by Sea Act 1992. Clause 7 sets out the territorial extent of the Bill, the commencement date and the short title.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7 ordered to stand part of the Bill.
New Clause 1
Regulations under section 5
“(1) Any power to make regulations under section 5, so far as exercisable by the Secretary of State acting alone or by the Secretary of State and the Scottish Ministers acting jointly, is exercisable by statutory instrument.
(2) For regulations made under section 5 by the Scottish Ministers acting alone, see section 27 of the 2010 Act (Scottish statutory instruments).
(3) A statutory instrument containing regulations made under section 5 by the Secretary of State acting alone, or by the Secretary of State and the Scottish Ministers acting jointly, may not be made unless a draft of the instrument containing the regulations has been laid before and approved by a resolution of each House of Parliament.
(4) Regulations made under section 5 by the Scottish Ministers acting alone, or by the Secretary of State and the Scottish Ministers acting jointly, are subject to the affirmative procedure (see section 29 of the 2010 Act).
(5) Where regulations are made under section 5 by the Secretary of State and the Scottish Ministers acting jointly—
(a) section 29 of the 2010 Act (affirmative procedure) applies in relation to the regulations as it applies in relation to devolved subordinate legislation (within the meaning of Part 2 of that Act) which is subject to the affirmative procedure, but as if references to a Scottish statutory instrument were to a statutory instrument, and
(b) section 32 of the 2010 Act (laying) applies in relation to the laying before the Scottish Parliament of the statutory instrument containing the regulations as it applies in relation to the laying before that Parliament of a Scottish statutory instrument (within the meaning of Part 2 of that Act).
(6) In this section ‘the 2010 Act’ means the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10).”—(Paul Scully.)
This new clause provides for regulations under clause 5 to be statutory instruments and to be subject to affirmative resolution procedure at Westminster and in the Scottish Parliament.
Brought up, read the First and Second time, and added to the Bill.
Bill, as amended, to be reported.
Electronic Trade Documents Bill [Lords]
Monday 10th July 2023
(9 months, 3 weeks ago)
Commons ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 19 June 2023 - (19 Jun 2023)
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
I beg to move, That the Bill be now read the Third time.
Let me take this opportunity to thank all the Members of this House and in the other place who have spoken in support of this transformational Bill, as well as those who contributed to scrutinising the Bill so deeply and effectively during its passage. The Bill has followed the special parliamentary procedure for Law Commission Bills. That procedure demonstrates that good and much-needed legislation that has already been thoroughly consulted on by the Law Commission can be introduced, debated and amended if required in an efficient and democratic way, but with reduced burdens on an already busy Parliament. Apart from the minor changes made to extend this critical legislation satisfactorily to the whole of the UK, the Bill that is before the House remains the work of the Law Commission. I also thank the officers and Members of the Scottish Parliament for their work in enabling that to happen so smoothly.
The Bill is a fine piece of work. It is informed by experts from academia, the legal profession and, crucially, the industries that stand to benefit most from its introduction and will be the driving force behind its implementation. As English law is the foundation of international trade, the Bill will put the United Kingdom ahead of not only the G7 countries, but almost the whole world. The UK is setting the approach that other jurisdictions will seek to follow, not just on the digitalisation of trade documents but on the future digitalisation of all trade, towards which the Bill is an important first step.
I record my thanks to Professor Sarah Green and her colleagues at the Law Commission, including Laura Burgoyne, Daniella Lupini and Siobhan McKeering, for their diligent work. I also thank Oliver Tones, the Bill manager, and Bobby Lawson, his deputy, along with the committed Government lawyers who have contributed to this, specifically Simon Brandon, Louise Dennison and Chris Callan. Thanks are also due to my private secretary, Jack Collins, who has ably assisted me and the Bill team throughout.
The Bill has global transformational potential. It will place the UK at the forefront of international trade as a thought leader for others to follow, and will save businesses an estimated £1.1 billion over the next 10 years—really tangible benefits, as well as being inspirational thought leaders for global trade. As such, I commend it to the House.
Alex Davies-Jones (Pontypridd) (Lab)
It is a very rare thing in this place to have the pleasure and privilege of responding on behalf of the Opposition to a Bill that we wholeheartedly support. For that reason, I will keep my comments brief.
As we know, the Bill follows a report and recommendations by the Law Commission. As the Minister has said, it seeks to remove the current legal impediment to producing documents in electronic form, allowing them to be legally recognised in the same way as paper documents, provided that they meet certain tests. It also sets out provisions relating to how the change of medium between electronic and paper documents will work in practice. It is an incredibly important Bill, particularly in a post-Brexit world where substantial red tape is having significant consequences for our ability to trade with the rest of the world. Labour sees the Bill as going some way towards unlocking that red tape by hopefully speeding up those processes.
We all know that central to international trade is the moving of goods across borders in order to get them from the seller to the buyer. That process typically involves multiple actors, including those involved in transportation, insurance, finance and logistics. One trade finance transaction can typically involve around 20 entities, and between 10 and 20 paper documents totalling over 100 pages. In a transaction covered by a bill of lading, for example, it is common to find 50 sheets of paper in a package of shipping documents that must be exchanged between as many as 30 different parties.
Despite the size and sophistication of the international trade market, many of its processes and the laws underlying them are based on practices developed by merchants hundreds of years ago. In particular, international trade still relies to a large extent on a special category of document that entitles the holder to claim performance of the obligation recorded in that document, and to transfer the right to claim performance of that obligation by transferring physical possession of the actual document. That document is said to embody the obligation, which may be to deliver goods or to pay money, rather than to merely evidence it. For example, a bill of lading is a document used in the carriage of goods by sea that, when transferred to the buyer or any subsequent lawful holder, gives that holder constructive possession of the goods described in the bill and a right to claim delivery of them from the carrier. The law governing those documents is premised on the idea that they can be physically held, or “possessed”. Industries using those documents are therefore prevented by law from moving to a fully paperless process.
To give a sense of the enormous amount of paperwork that international trade generates, the world’s largest container ships can carry 24,000 twenty-foot containers at any one time on any one voyage. For each of those cargoes, paper transport documentation has to be produced. That documentation must be processed manually to go from the shipper of the goods to the ultimate buyer at the destination, sometimes through numerous intermediaries. The effect of the current law is that much of the documentation needs to be in hard physical copy. The Digital Container Shipping Association has estimated that 16 million original bills of lading were issued by ocean carriers in 2020, and that more than 99% of those were in paper form. The Minister does not need reminding of the significant environmental cost of that way of working.
For those reasons, we support the Bill in its entirety. We see it as a long-overdue reform that allows for the legal recognition of certain types of documents used in trade and trade finance in electronic form. That will mean that parties can finally use the law that currently applies to paper trade documents when transacting with electronic trade documents. It was great of the Minister to confirm in Committee that the Department for Business and Trade will manage this legislation. We were concerned about where responsibility would actually sit, given that the Bill was brought forward by the Department for Science, Innovation and Technology and the Law Commission. We recognise and welcome that clarification and I am grateful to the Minister for it.
Labour sees the Bill as a valuable tool in ensuring that the world of trade and commerce operates as smoothly and efficiently as possible, and that UK businesses are not disadvantaged in any way. Ultimately, that is what we all want to see.
Anthony Mangnall (Totnes) (Con)
I rise fully in support of the Bill, and congratulate the Government and the Minister on the extraordinary work they have done on it. I also congratulate all Members from the House of Lords and the Opposition, and all the individuals and officials, who have done so much to make a Bill that might on its face look very unattractive and unexciting something that I believe to be extremely exciting.
I have made no secret of the fact that, before I got into this place, my background was in trade. I understand well the value of bills of lading and the complexities that come with them, but I also stand here as the representative of one of the largest exporting fishing ports in the United Kingdom, Brixham. There, the concept of documentation and the points that we make about it are absolutely essential to those fishermen’s success, and indeed their profitability.
I will be extremely brief, because time marches on this evening. The Bill will streamline trade—it will allow us to do all the things that we very much need to do in an era outside of the European Union, where signing new trade deals offers us new markets, new opportunities and new horizons. When I speak to my fishermen, one of the biggest and most significant causes of concern is the Electronic Trade Documents Bill and putting forward export health certificates and export documentation, as well as import documentation. The Bill will allow us to streamline those processes to make sure that those goods reach their markets. Whether it is fishing, farming, food, goods or shipping, we must ensure that we take full advantage of opportunities to help small businesses across this country that are exporting, as well as those that are importing.
We must look at how the Bill will relate to the European Union and its implementation of similar policies, and must also consider how the Bill will work with Commonwealth countries. We have made no secret of the fact that we want to work more with the Commonwealth, or that through things like the comprehensive and progressive agreement for trans-pacific partnership, we want to be able to do more in terms of trade. This Bill sets the benchmark—we should be unashamed of talking about the value that it can bring to our economy. The Minister and the Opposition have done very well in producing the Bill and working it through to the stage it has reached, but my final congratulations go to the Minister.
Paul Scully
My hon. Friend has spoken eloquently about fishing, and has previously raised the subject of fishing with me. Health certificates are not currently within the scope of the Bill, because they do not relate to possession, but fishermen will definitely benefit from the Bill just as other sectors will.
Anthony Mangnall
As ever, the Minister is incredibly gracious. I appreciate his intervention and thank him for that point, because it will send a message of confidence to my markets, and indeed to fishermen across the country.
I do not need to detain the House any longer, other than to say that the Bill is extremely welcome and we must talk it up. Coupled with the Procurement Bill that we passed just a few weeks ago, we are making real progress in the area of trade. We have to be able to get out there and talk about it.
Patrick Grady (Glasgow North) (SNP)
I echo the thanks that have been paid to the Bill teams—the civil servants, both here and in Scotland, who have worked to bring the Bill through. When it was in Committee, a debate on a report from the Privileges Committee was taking place in the Chamber, which seemed to inject a sense of urgency into the Committee proceedings and a feeling that some Members would rather have been elsewhere. Today’s debate comes after the debate on the report from the Privileges Committee has concluded, so there is slightly less pressure, and the Bill is getting the airing it deserves.
The hon. Member for Totnes (Anthony Mangnall) was right to take the opportunity to put his points on the record. The Bill is largely technical and uncontroversial, but it is important to put on record some of the key issues that have been identified during its passage, both about its contents and the way in which the Government have taken it through Parliament.
The Bill will ease significantly the regulatory and bureaucratic burdens on businesses by allowing the legal recognition of electronic trade documents. I think the Government themselves reckon that this could be worth over £1 billion in value to the UK’s international trade over the next 10 years. As we have heard, hundreds of pages of documents previously required to be produced in physical format—which of course will almost certainly have been generated electronically anyway and then printed off—can now be exchanged digitally, more quickly and more securely.
As enabling and facilitative legislation, the Bill paves the way for further innovation. Last week, I had some fascinating discussions with researchers from the University of Lincoln’s Institute for Agri-Food Technology, who were visiting Parliament as part of the annual evidence week activities. They and the many other businesses and academics they work with were very excited about the opportunities this Bill will provide for data sharing and for analytics about the movement of goods, and the opportunities in particular that that could bring, for example, for the reduction of food waste and the environmental impact across the supply chain.
I think I spent slightly longer discussing the Bill with those academics than the Bill spent in its Second Reading Committee, which concluded in just seven minutes, and the Public Bill Committee sat for a grand total of 15 minutes. Their lordships managed slightly better, with a total of about two and half hours of scrutiny across three stages. I think stakeholders must sometimes look at our proceedings with not a little bemusement, and wonder about the Government’s priorities in the allocation and use of time, even if this is an expedited procedure.
Of course, despite the Law Commission’s work to develop proposals for the Bill and the various stages of consideration in the House of Lords, it was only when the Bill got to the Committee stage that the Government were finally able to bring forward amendments that would provide Scottish Ministers with the reassurances they needed to recommend that Holyrood consent to the Bill. Without those amendments, there was a serious risk of yet more legislative overreach by the UK Government, straying into areas of Scots law that have been devolved to the Scottish Parliament for nearly 25 years.
The Bill has also been scrutinised by two Committees of the Scottish Parliament—the Economy and Fair Work Committee, and the Delegated Powers and Law Reform Committee. The Economy and Fair Work Committee took evidence from the Scottish Government’s Minister for Small Business, Innovation and Trade in a session that lasted 23 minutes, which was still one minute longer than the total time taken by this House to consider the Bill until we started this Third Reading consideration.
However, those Committees were ultimately able to agree with the Scottish Government’s recommendation that the Scottish Parliament should in the end grant the Bill legislative consent. But they have both, as indeed have Scottish Government Ministers, expressed concern and disappointment at the time it has taken to resolve the challenges identified by the Scottish Government in the Bill, as first presented both to the Lords and to this House. Consensus has finally been reached and, as the Order Paper notes, on 27 June the Scottish Parliament agreed a legislative consent motion.
I hope that means attention can now turn to the implementation of the provisions of the Bill, the easing of bureaucratic burdens, and the innovation in information and data exchange that producers, traders and other stakeholders in supply chains use to keep us fed, clothed and otherwise going about our daily lives.
Jim Shannon (Strangford) (DUP)
First, thank you, Mr Deputy Speaker, for allowing me to speak on this issue. I will not take too long, you will be glad to hear.
As we are all aware at this stage, the main purpose of the Bill is to provide the shipping industry with the legal mechanism to enable the use of electronic trade documents without the need to engage in complex and often operationally burdensome processes. The hon. Member for Totnes (Anthony Mangnall) referred to the fishing sector, and the Minister replied to him in relation to the concerns that he and I both have about that sector in particular. The fishing sector has always been burdened with the bureaucracy of Europe, and we always hoped that, whenever we got changes, those burdens might be lessened, but for us in Northern Ireland that really has not been the case.
I have long been an advocate of cutting unnecessary red tape. That was often one of my gripes with Europe, as I watched small-scale farmers who knew their land, their herds and their crops like the back of their hand, yet were asked to fill in forms that ranged from 20 to 70 pages, and sometimes more, for their grants. The result of all this is additional stress and the cost of paying consultants to help with what was and is avoidable. For those of us used to being in an office, printing or scanning is simple—so simple, in fact, that we sometimes forget that not every household in the UK has the facilities to do that. This is why I always advocate the need to bring along those who are not tech savvy, not leave them behind, and that is why the Government bringing forward this Bill tonight is so important.
The beauty of Brexit for those who live here on the mainland—we in Northern Ireland do not currently enjoy that release from European machination—was that such unnecessary bureaucracy would cease, and in my opinion that is what this Bill seeks to do. That is why it is welcome to have it before us, and why we are all very happy with where we are.
With that mindset, I welcome anything that cuts unnecessary red tape, but I still wish to satisfy myself that, while the paperwork format has changed, the necessary security and accountability remains. I do believe, having looked at some of the issues relating to the Bill, that this is the case, but the Minister might wish to confirm that at the end of the debate. The reduction of costs associated with the use of paper trade documents and a shift to a more environmentally friendly system are welcome innovations, along with the development of digital products and services within the shipping industry, with a view to stimulating business growth.
In conclusion, an essential component must be increased security and transparency in shipping documentation. I know that has always been the aim of the Government in introducing the Bill, and I very much welcome that. I hope to see fully achieved what the Minister will sum up at the end. We must make way for progress, while still holding on to systems that work well and are in place, and I do believe that this Bill brings those two aims into working order together. With that in mind, I very much welcome where we are.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
Northern Ireland Budget (No. 2) Bill (Allocation of Time)
Ordered,
That the following provisions shall apply to the proceedings on the Northern Ireland Budget (No. 2) Bill:
Timetable
(1) (a) Proceedings on Second Reading and in Committee of the whole House, any proceedings on Consideration and proceedings on Third Reading shall be taken in two days in accordance with this Order.
(b) Proceedings on Second Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on the Motion for this Order.
(c) Proceedings in Committee of the whole House, any proceedings on Consideration and proceedings on Third Reading shall be taken on the second day and shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings in Committee of the whole House.
Timing of proceedings and Questions to be put
(2) (a) When the Bill has been read a second time it shall, despite Standing Order No. 63 (Committal of bills not subject to a programme order), stand committed to a Committee of the whole House without any Question being put;
(b) When the Order of the Day is read for the House to resolve itself into a Committee on the Bill, the Speaker shall leave the Chair without putting any Question and the House shall resolve itself into a Committee forthwith, whether or not notice of an Instruction has been given.
(3) (a) On the conclusion of proceedings in Committee of the whole House, the Chair shall report the Bill to the House without putting any Question.
(b) If the Bill is reported with amendments, the House shall proceed to consider the Bill as amended without any Question being put.
(4) For the purpose of bringing any proceedings to a conclusion in accordance with paragraph (1), the Chair or Speaker shall forthwith put the following Questions in the same order as they would fall to be put if this Order did not apply:
(a) any Question already proposed from the chair;
(b) any Question necessary to bring to a decision a Question so proposed;
(c) the Question on any amendment moved or Motion made by a Minister of the Crown;
(d) the question on any amendment, new Clause or new Schedule selected by the Chair or Speaker for separate decision;
(e) any other Question necessary for the disposal of the business to be concluded;
and shall not put any other questions, other than the question on any motion described in paragraph (15)(a) of this Order.
(5) On a Motion so made for a new Clause or a new Schedule, the Chair or Speaker shall put only the Question that the Clause or Schedule be added to the Bill.
(6) If two or more Questions would fall to be put under paragraph (4)(c) on successive amendments moved or Motions made by a Minister of the Crown, the Chair or Speaker shall instead put a single Question in relation to those amendments or Motions.
(7) If two or more Questions would fall to be put under paragraph (4)(e) in relation to successive provisions of the Bill, the Chair shall instead put a single Question in relation to those provisions, except that the Question shall be put separately on any Clause of or Schedule to the Bill which a Minister of the Crown has signified an intention to leave out.
Consideration of Lords Amendments
(8) (a) Any Lords Amendments to the Bill may be considered forthwith without any Question being put; and any proceedings interrupted for that purpose shall be suspended accordingly.
(b) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement; and any proceedings suspended under sub-paragraph (a) shall thereupon be resumed.
(9) Paragraphs (2) to (7) of Standing Order No. 83F (Programme orders: conclusion of proceedings on consideration of Lords amendments) apply for the purposes of bringing any proceedings to a conclusion in accordance with paragraph (8) of this Order.
Subsequent stages
(10) (a) Any further Message from the Lords on the Bill may be considered forthwith without any Question being put; and any proceedings interrupted for that purpose shall be suspended accordingly.
(b) Proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement; and any proceedings suspended under sub-paragraph (a) shall thereupon be resumed.
(11) Paragraphs (2) to (5) of Standing Order No. 83G (Programme orders: conclusion of proceedings on further messages from the Lords) apply for the purposes of bringing any proceedings to a conclusion in accordance with paragraph (10) of this Order.
Reasons Committee
(12) Paragraphs (2) to (6) of Standing Order No. 83H (Programme orders: reasons committee) apply in relation to any committee to be appointed to draw up reasons after proceedings have been brought to a conclusion in accordance with this Order.
Miscellaneous
(13) Standing Order No. 15(1) (Exempted business) shall apply to proceedings on the Bill.
(14) Standing Order No. 82 (Business Committee) shall not apply in relation to any proceedings to which this Order applies.
(15) (a) No Motion shall be made, except by a Minister of the Crown, to alter the order in which any proceedings on the Bill are taken, to recommit the Bill or to vary or supplement the provisions of this Order.
(b) No notice shall be required of such a Motion.
(c) Such a Motion may be considered forthwith without any Question being put; and any proceedings interrupted for that purpose shall be suspended accordingly.
(d) The Question on such a Motion shall be put forthwith; and any proceedings suspended under sub-paragraph (c) shall thereupon be resumed.
(e) Standing Order No. 15(1) (Exempted business) shall apply to proceedings on such a Motion.
(16) (a) No dilatory Motion shall be made in relation to proceedings to which this Order applies except by a Minister of the Crown.
(b) The Question on any such Motion shall be put forthwith.
(17) (a) The start of any debate under Standing Order No. 24 (Emergency debates) to be held on a day on which the Bill has been set down to be taken as an Order of the Day shall be postponed until the conclusion of any proceedings on that day to which this Order applies.
(b) Standing Order No. 15(1) (Exempted business) shall apply to proceedings in respect of such a debate.
(18) Proceedings to which this Order applies shall not be interrupted under any Standing Order relating to the sittings of the House.
(19) (a) Any private business which has been set down for consideration at a time falling after the commencement of proceedings on the motion for this Order or on the Bill on a day on which the Bill has been set down to be taken as an Order of the Day shall, instead of being considered as provided by Standing Orders or by any Order of the House, be considered at the conclusion of the proceedings on the Bill on that day.
(b) Standing Order No. 15(1) (Exempted business) shall apply to the private business so far as necessary for the purpose of securing that the business may be considered for a period of three hours.—(Scott Mann.)
Electronic Trade Documents Bill [HL]
Wednesday 19th July 2023
(9 months, 2 weeks ago)
Lords ChamberRead Full debate Electronic Trade Documents Act 2023 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 19 June 2023 - (19 Jun 2023)
Viscount Camrose
That this House do agree with the Commons in their Amendments 1 to 6.
“(4A) Subsection (4) does not apply if the regulations are to be made by the Secretary of State and the Scottish Ministers acting jointly.”
“(5A) “The appropriate authority”, in relation to regulations under subsection (2)(b), means—
(a) in any case, the Secretary of State or the Secretary of State and the Scottish Ministers acting jointly;
(b) in a case in which all of the provision made by the regulations is within Scottish devolved competence, the Scottish Ministers.
(5B) Provision is within Scottish devolved competence if it is provision which would be within the legislative competence of the Scottish Parliament if contained in an Act of that Parliament.”
“Regulations under section 5
(1) Any power to make regulations under section 5, so far as exercisable by the Secretary of State acting alone or by the Secretary of State and the Scottish Ministers acting jointly, is exercisable by statutory instrument.
(2) For regulations made under section 5 by the Scottish Ministers acting alone, see section 27 of the 2010 Act (Scottish statutory instruments).
(3) A statutory instrument containing regulations made under section 5 by the Secretary of State acting alone, or by the Secretary of State and the Scottish Ministers acting jointly, may not be made unless a draft of the instrument containing the regulations has been laid before and approved by a resolution of each House of Parliament.
(4) Regulations made under section 5 by the Scottish Ministers acting alone, or by the Secretary of State and the Scottish Ministers acting jointly, are subject to the affirmative procedure (see section 29 of the 2010 Act).
(5) Where regulations are made under section 5 by the Secretary of State and the Scottish Ministers acting jointly—
(a) section 29 of the 2010 Act (affirmative procedure) applies in relation to the regulations as it applies in relation to devolved subordinate legislation (within the meaning of Part 2 of that Act) which is subject to the affirmative procedure, but as if references to a Scottish statutory instrument were to a statutory instrument, and
(b) section 32 of the 2010 Act (laying) applies in relation to the laying before the Scottish Parliament of the statutory instrument containing the regulations as it applies in relation to the laying before that Parliament of a Scottish statutory instrument (within the meaning of Part 2 of that Act).
(6) In this section “the 2010 Act” means the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10).”
The Parliamentary Under-Secretary of State, Department for Science, Innovation and Technology (Viscount Camrose) (Con)
My Lords, the Government’s intention has always been that this Bill should apply UK-wide. In the process of delivering this ambition, we were able to confirm that legislative consent was not required from Northern Ireland or Wales. However, in the case of Scotland, private property law, as affected by this Bill, is a devolved matter and therefore legislative consent is necessary. As a result of amendments made to the Bill in the other place, we have received legislative consent from the Scottish Parliament.
The Bill has been amended to the effect that it now confers the delegated power in Clause 5(2)(b) additionally on Scottish Ministers both to exercise the power alone within areas of devolved competence and to act jointly with the Secretary of State. By including the option for Scottish Ministers to act alone and also to act jointly with the Secretary of State, the delegated powers can be exercised in a flexible manner that best suits the prevailing need for secondary legislation. Moreover, it avoids any future uncertainty as to whether matters are within the devolved competence of Scottish Ministers, particularly if they cut across devolved and reserved matters. The requirement in Clause 5(4) for the Secretary of State to consult Scottish Ministers before exercising the power in Clause 5(2)(b) will be disapplied in circumstances where the Secretary of State and Scottish Ministers act jointly to make regulations.
As noted earlier, while the Bill is unlikely to need future amendment, we believe that such changes are best delivered through concurrent delegated powers, which will allow both the Secretary of State and Scottish Ministers to make those changes. The amendments will therefore enable Scottish Ministers to make such regulations in a case in which all the provision made by the regulations is within Scottish devolved competence, and to act jointly with, or be consulted by, the Secretary of State in other cases.
The delegated powers previously afforded to the Secretary of State by the Bill are not substantively affected by this amendment. In view of this, Amendment 6 provides for regulations under Clause 5 to be subject to the affirmative resolution procedure at Westminster and in the Scottish Parliament.
In addition to these two substantive amendments, we have also had to include four consequential amendments to update and correct cross-references within the Bill. I hope noble Lords will acknowledge the requirement for the amendment to Clause 5 to change the delegated power and the consequential amendments that allow this new clause to be inserted into the Bill.
I reiterate the thanks that my noble friend Lord Parkinson of Whitley Bay gave at Third Reading to all those involved in the passage of this transformational Bill. I beg to move.
Lord Bassam of Brighton (Lab)
My Lords, I have studied the amendments closely and I can see the beneficial net effect of them. I guess that Amendment 4 is probably the most crucial to the package, and I think the noble Viscount was right to introduce them together in the way he did. I do not have much to say other than that, except to congratulate the Government on having the foresight to bring this legislation forward, and to thank the noble Lord, Lord Parkinson, for the work he did both in the Special Public Bill Committee and on the Floor of the House in considering the legislation.
I have a question for the noble Viscount, which I asked the last time we considered the Bill. This is a very important and significant piece of legislation that will go a long way to making the passage of international trade much easier, considering the impact that it could have. It will make it much easier to trade across international boundaries, and the volume of trade is such that removing the constraint on the use of electronic communication is extremely important. It is estimated that it could save as much as 15% of current transaction costs. That would be a considerable net benefit to the UK economy.
The one thing that worried and troubled me during our consideration was that there did not seem to be an implementation plan. When I quizzed the noble Lord, Lord Parkinson, on this, I was less than convinced by his response; I hope he was more convinced than I was. I do not see a plan yet. There is a role for one of the government departments involved in this to take a lead. It is really important that it does so in a way that works well with business, and consults business and all other interests to ensure that we get the maximum from this legislation; otherwise, I suspect it will lie unused.
We are one of only two jurisdictions that have made advances and progress on this. I know that others are looking at our work in the field and, if we can make a success of it, others will undoubtedly follow—but it needs leadership at the top to make this useful piece of legislation workable in future and to enhance our credentials as an international trading country.
Lord Clement-Jones (LD)
My Lords, I add my thanks to the Minister for moving these amendments from the Commons. He has shown remarkable consistency with the words of his honourable friend Mr Scully in the Commons—I think word for word it is what he said, so that is excellent. I see other members of the committee here; I am only sorry that the noble and learned Lord, Lord Thomas of Cwmgiedd, is not here to see the final process and see this legislation go forward.
I welcome these amendments, because it means that the legislation will cover the whole United Kingdom, and that the exception power in Clause 5 will operate across the UK. Could the Minister say whether anything is in contemplation under Clause 5 to be excepted in using that power across the UK?
I very much agree with what the noble Lord, Lord Bassam, said about a plan for implementation. This is a much more important Bill than it appears at first sight, and we should really speed it on its way in implementation terms.
Lord Holmes of Richmond (Con)
My Lords, I rise briefly to support the amendments as set out. In doing so, I declare my technology interests as set out in the register.
This is the most important Bill that no one has ever heard of. It demonstrates what we can do when we combine the potential of these new technologies with the great good fortune of common law that we have in this country. I particularly support the comments made by the noble Lords, Lord Bassam and Lord Clement-Jones, about the Government’s plan for implementation. Although it is obviously critical that we get Royal Assent to this Bill as soon as possible, that is really where the work begins. As my noble friend the Minister knows, the Bill is rightly permissive in nature; it cannot be that, having done all the work through both Houses of Parliament, the Bill is then just left on the shelf. There needs to be an active plan for implementation, communicating to all the sectors and all the organisations, institutions and brilliant businesses in this space to seize the opportunity that comes from electronic trade documents. Does my noble friend the Minister agree— and will he fill out some more detail on what that implementation plan is?
Viscount Camrose (Con)
I thank all three noble Lords who have commented. The noble Lord, Lord Bassam, and others have rightly raised the issue of how we implement the provision, and I could not agree more strongly that the prospect of such a brilliant and transformational Bill gathering dust on a shelf is rather depressing; it would be a great waste.
Industry is very keen to implement this itself, but it is on us to track how that is going and ensure that it does. On how exactly industry goes about it, I would like to write to noble Lords to explain that, because I very much recognise the importance of the question.
With respect to any actions envisaged in Clause 5, nothing is currently envisaged.
Royal Assent
Thursday 20th July 2023
(9 months, 1 week ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 7 December 2022 - (7 Dec 2022)