The Law Commission has started consulting on proposals that could see paper documents in some areas of international trade scrapped in favour of electronic documents, a move that could save billions of pounds.
International trade still relies on the use of paper documents, which is both costly and inefficient, and recently became an additional risk during the Covid pandemic.
The independent body is considering whether to allow for the legal recognition of electronic versions of documents like bills of lading – a contract between carrier and shipper – and bills of exchange – a document recognising that one party owes another a fixed sum of money.
The market is still modelled on outdated practices developed by merchants hundreds of years ago, based on the idea that trade documents had to be physically possessed.
If electronic documents were put into practice, the reforms could “revolutionise global trade”, the Law Commission said, bringing the process into the 21st century.
The system would be more efficient, and the operating costs of trade would be reduced.
The move would also be good for the environment, with global container shipping estimated to generate 28.5 billion paper documents a year.
The International Chamber of Commerce has estimated that digitising the documents could generate £25bn in new global economic growth by 2024, and free up £224bn in efficiency savings.
Professor Sarah Green, commercial and common law commissioner said: “Electronic documents have the potential to make global trade more efficient, cheaper and more secure. Until the law catches up with the relevant technology, however, these benefits – worth billions every year – will not be realised.
“Our proposals would bring the law and global trade into the 21st century, generating benefits on an international scale.”
International trade is worth £1.153trn to the UK.
The Law Commission’s consultation will run until 30 July, the responses of which will be used to help the Law Commission develop final recommendations for reform, and a final draft bill, which it is aiming to publish in early 2022.