Outdated laws preventing digital documentation ‘are stifling trade’

REGULATIONS must change to give digital documents the same powers as paper, the Law Commission says.

The legal watchdog said businesses were stuck in the Victorian era using paper because electronic documents were not legally recognised. This means companies worldwide wasting an estimated £224billion a year doing everything manually – as well as contributing to climate change by killing trees.

The commission recommended that Britain allow for the legal recognition of electronic documents. It said: “The reforms could revolutionise global trade and bring the processes into the 21st century.” It could also save billions lost through inefficient practices and unlock £24billion in global economic growth by 2024, according to the International Chamber of Commerce.

The commission cited international trade, where deals worth £1.15trillion a year are done on paper. They are based on “outdated” laws drawn up by merchants from the 17th, 18th and 19th centuries, it said. A transaction could require 10 to 20 paper documents, totalling 100 pages. Global container shipping alone generates 28.5 billion documents a year, it added.

“The potential positive impacts of electronic trade documents – including significant financial and efficiency gains, and environmental benefits – should not be underestimated,” the commission said.

It said the shipping and transport industry, one of the biggest in the world, is being held back by ancient laws. Central to these are “documentary intangibles” that confer an obligation to pay money or deliver goods. For example, handing over a bill for loading cargo gives the new holder a right to the goods, based on the legal principle that ownership of the document confers ownership of the goods.

Under English law, possession is only associated with tangible assets, not electronic documents.