Dr Theodora A Christou, Co-Founder and Director, Centre for Applied Sustainable Transition Law (CASTL)


“The most obvious link to sustainability is the eradication of the 4 billion pieces of paper floating around the world as part of a paper-based trade process”

“For the full benefits to be felt the shift to digital trade needs to be achieved at scale, not only in the countries that have already aligned their laws to MLETR, but also those countries which have not”

On 20th September 2023 the law of England and Wales changed to align with the UNCITRAL Model Law on Electronic Transferable Records (MLETR). The Electronic Trade Documents Act 2023 (the ‘Act’) entered into force introducing a simple change. The Act gives functional equivalence to electronic documents and records with that of paper documents. It means that trade documents no longer need to be presented physically in paper form but can be presented as electronic documents or records.  This is a historical moment which changes the way trade has been done for centuries and has the potential to have a significant impact not only on trade but on countless secondary markets as well as sustainability.

Through the support of the ICC, much has been written on the commercial benefits. The business case is important, because for adoption of digital based processes and solutions, it is necessary to illustrate the utility obtained though the transition.

The focus here will be on the sustainability issue. The benefits of digital trade have been mapped against the sustainable development goals, including in CASTL’s Blueprint Paper on Digital Trade and UNCITRAL’s MLETR prepared with the support of the EBRD.[1] The most obvious link to sustainability is the eradication of the 4 billion pieces of paper floating around the world as part of a paper-based trade process. The positive impact on the environment, on climate change, on life on land and in the sea is an immediate benefit from removing paper from the process. However this can be further amplified in ‘smart’ ways.

With all the information jumping off the 100s of pieces of fragmented papers and into digitalised data, this data can now be analysed and sustainability opportunities identified. For example, technology can be utilised together with the data, a company will now be able to link the trade related data to other data such as GPS and ‘internet of things’ related products/services to identify potential areas where their carbon footprint could be reduced. If they know the origins of a product or materials together with the journey of all the component parts, and the disposal of related waste or end of cycle, it is possible to make better informed decisions.

The sustainability benefits are not only green and blue ones, beyond the environmental, they include economic growth, increasing inclusivity of MSMEs, improving gender equality, and better governance (including the ability to make reporting and disclosures easier). Digitalisation is not a panacea but can enable sustainability goals such as improving transparency and traceability of supply chains.

Reduction in trade barriers and facilitation of global trade will help lift people out of poverty through reduced consumer costs, job creation and improved standards of living.
A substantial percentage of businesses are operated by women. Increasing participation in trade will improve gender equality and empower women.
Enhancing inclusion of all sized businesses, through the lowering of costs and the enhancement of sustainable trade as an instrument of economic growth.
Digital trade can promote efficiencies through smart technological solutions, the removal of legal obstacles will lead to increased innovations.
Inequalities within and among countries, and in all industries will be reduced as digital trade enables greater participation.
Reducing the amount of paper documents circulating in the system will promote sustainable patterns.
The shift from paper to electronic documents, and from manual to digital trade processes will reduce carbon emissions.
Reduction of the quantity of paper documents required in trade transactions will protect and promote sustainable ecosystems on land.
The use of technological solutions such as systems based on distributed ledger technology (DLT) have the potential of reducing fraud and flagging potential instances of corruption.
Interoperable digital trade systems will enable increased partnerships between governments, but also business and other transnational stakeholders.

Source: CASTL Blueprint Paper on Digital Trade and the UNCITRAL MLETR for EBRD 2023

As the possibilities of the new legal framework are further explored and new technologies grow, there will also be secondary benefits. Some are already in the pipeline relating to finance, others are being discussed such as the impact on credit rating.

For the full benefits to be felt the shift to digital trade needs to be achieved at scale, not only in the countries that have already aligned their laws to MLETR, but also those countries which have not. The ICC United Kingdom’s C4DTI Legal Technical Assistance Taskforce was established to assist countries with their digital agenda and in particular legal reform. Our first project with Thailand produced an action plan which sets out the steps to be taken in order to achieve effective implementation of a digital trade agenda.[2] These steps include before the law has been reformed, such as market preparation and stakeholder engagement (both public and private), as well as post-legislative adoption such as pilots.

An enabling legal framework remains key to supporting this transition. The G7 governments have committed to MLETR alignment and many are close to finalising the necessary legal reform. The Commonwealth has also made it a priority. In order to leave no one behind, it is important that legal reform is now supported across the globe.

Footnotes

[1] Theodora Christou and John Taylor, Blueprint Paper on Digital Trade and the UNCITRAL Model Law on Electronic Transferable Records, (CASTL and EBRD) 2023 Available at: https://thecastl.com/projects

2 Theodora Christou, Making Thai-UK trade cheaper, faster and simpler, (CASTL and ICC United Kingdom C4DTI) 2023 Available at: https://thecastl.com/projects

[1] Theodora Christou and John Taylor, Blueprint Paper on Digital Trade and the UNCITRAL Model Law on Electronic Transferable Records, (CASTL and EBRD) 2023 Available at: https://thecastl.com/projects

[2] Theodora Christou, Making Thai-UK trade cheaper, faster and simpler, (CASTL and ICC United Kingdom C4DTI) 2023 Available at: https://thecastl.com/projects