The ICC Calls on Governments to Allow for Digital Authentication and Delivery of Trade Documents, in Light of the Covid-19-Induced Disruptions

Sullivan & Worcester

[co-author: Szonja Kolbenheyer]

On 6 April 2020, the International Chamber of Commerce (ICC) published an urgent memorandum addressed to governments and Central Banks, urging them to take the necessary steps towards the immediate transition from mandating the use of paper-based trade documentation to recognising digital authentication and delivery of documents as a legally binding and enforceable alternative.

The ICC highlighted that the Covid-19-induced disruption in the market is likely to have significant negative impact on essential global trade flows with increased implications for the viability of many micro-, small- and medium-sized enterprises (MSMEs).

It stressed that bank-intermediated trade finance is an essential contributor to providing working capital for international trade transactions and serves as a means to mitigating payment risk, supporting approximately 30 per cent of all international trades, according to The Bank for International Settlements’ estimation. The effective functioning of bank-intermediated transactions is especially key in the case of developing economies and essential commodity markets.

The ICC further highlighted that trade finance transactions rely, to a very great extent, on hard copy paper documentation for the delivery of goods and to process payments, which is mostly due to the fact that in many jurisdictions electronic trade documents are either prohibited or their legal status is unclear. The ICC called on governments to provide emergency interventions to remove reliance on paper-based trade documentation, emphasising that as things stand, severe disruption to supply chains for essential goods is likely.

On 8 April 2020, the Secretary General of ICC UK addressed a public letter to the Secretary of State for Justice, urging the UK Government to separate the trade-related aspects of the envisaged law reform on digitisation and put these to Parliament as a matter of urgency, highlighting that the planned time frame of 2021 would be insufficient to ensure the effective continuity in global trade.

The Secretary General proposed implementing the requested changes via secondary legislation under specific Acts and/or using the Electronic Communications Act 2000. These could include assisting with digital bills of exchange, promissory notes and electronic bills of lading. This would, it is argued, show the UK leading the way, and, in particular, English law.

The ICC recommended that the following actions could be taken by governments:

  • Void any legal requirements for trade documentation to be in hard copy, even if temporarily; and
  • Adopt the UNCITRAL Model Law on Electronic Transferrable Records, and especially:
    • Article 7 on electronic transferable records;
    • Article 8-11 on the functional equivalence of electronic and manual records; and
    • Article 12 on the general reliability standards for verifying signatures, integrity and other aspects of electronic records.
  • Action points for banks and businesses involved in trade and trade finance:
    • Support any lobbying efforts in this regard and especially where changes can be implemented quickly and easily.
    • Look at your procedures and your current documentation to see if changes can be made to facilitate digital processes.
    • Contact customers and counterparties to reach alternative arrangements to continue the flow of trade and the continued availability of trade finance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sullivan & Worcester | Attorney Advertising

Written by:

Sullivan & Worcester

Sullivan & Worcester on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide