Electronic Trade Documents Bill [HL]

Lord Holmes of Richmond Excerpts

Second reading committee
Monday 7th November 2022 Grand Committee

[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.

Electronic Trade Documents Bill [HL]

Lord Holmes of Richmond Excerpts

Lords Special Public Bill Committee
Monday 20th February 2023 Other Business

It is also important to stress that the Bill shows the UK’s leadership in the adoption of the MLETR. It will encourage other states to adapt their law to be interoperable with the MLETR by providing a model of what other states may wish to adopt.

[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.

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[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.

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[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.

Electronic Trade Documents Bill [HL]

Lord Holmes of Richmond Excerpts

Consideration of Commons amendments
Wednesday 19th July 2023 Lords Chamber

[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.