Electronic Trade Documents Bill [ Lords ] (First sitting)

Alex Davies-Jones Excerpts

Committee stage
Monday 19th June 2023 Public Bill Committees

[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

--- Later in debate ---

[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.

Electronic Trade Documents Bill [Lords]

Alex Davies-Jones Excerpts

3rd reading
Monday 10th July 2023 Commons Chamber

[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.