Electronic Trade Documents Bill [HL]

Special Public Bill Committee

Clause 1: Definition of “paper trade document”

Debate on whether Clause 1 should stand part of the Bill.

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.

I am not quite sure about the procedure. Is this a debate on Clause 1 standing part?

Yes.

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.

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.

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.

Clause 1 agreed.

Clause 2: Definition of “electronic trade document”

Debate on whether Clause 2 should stand part of the Bill.

Member’s explanatory statement

This motion is to facilitate a debate on the Clause, including to understand how the provisions of the UNCITRAL Model Law on Electronic Trade Records are consistent with the structure of this Bill.

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).

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 legal technique also has the advantage of making the legislation short, simple and with the minimum adaptation to English law. I regret to say that we can rarely say that of Bills these days. If issues arise that have not been foreseen or there are changes in technology, the judiciary across the UK will thus be in a position to work out, as it has done over the centuries in England and Scotland, the legal solution that best meets the needs of international trade.

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.