Written by Ellis Lawson (partner) and David Green (paralegal)

A significant milestone in the digitalisation of trade was reached on 26 July 2024 with the World Trade Organisation (WTO) Joint Statement Initiative (JSI) on Electronic Commerce publishing the text of its agreement on electronic commerce.

The wide-ranging agreement’s reference to the facilitation of electronic transferable records will have piqued the interest of those in the trade finance world, with the widespread use of digital bills of exchange, promissory notes, bills of lading, warehouse receipts and other trade documents moving one step closer.

In our latest trade and export finance webinar, partners Mark Norris and Ellis Lawson gave an update on the export credit agency and development finance market, including:

1. a look back at 2023;
2. consideration of the key trends shaping the market and what we can expect from the year ahead;
3. a discussion of some of the sustainability features which are increasing in prominence in the export and development finance market; and
4. a discussion of the increasing funding gap in developing markets, with a particular focus on the need for “adaptation finance”.

Written by Ellis Lawson and Maria Capocci

Our latest Trade & Export Finance webinar, delivered by Maria Capocci (Associate) and Ellis Lawson (Partner), considered the different types of environmental, social and governance (ESG) loans and their current position in the finance market. The webinar also provided a practical insight into the key concepts behind the LMA's draft sustainability linked loan (SLL) provisions and how parties may look to negotiate those provisions.

Edited by: Matilda Johnson and Geoffrey Wynne

Today is the day, the Electronic Trade Documents Act (ETDA) is now in force! Although a short piece of legislation, it is flexible and seeks to give certain trade-related electronic documents the same legal recognition as their paper counterparts. This will help to move at least some of the sizeable trade market into the digital era.

It is no secret that the ETDA will offer a certain level of clarity to help mold responses to the ever-growing number of questions and approaches put forward by clients and industry bodies that are looking to use digital solutions for trade and trade finance facilities and finance transactions. However, the flexibility afforded by the ETDA means that different players in the industry could take a range of different approaches in order to create an end to end digital, ETDA-compliant, trade or trade finance transaction.

There are a number of parties seeking advice to determine how best to deal with their digital solutions for trade such as key legal and operational elements not covered by the ETDA, including governing law considerations and the issues presented around the flexible, technology neutral concept of a "reliable system." No doubt many solutions will emerge.

For further information on the ETDA or on the digitalisation of trade in general, please contact Geoff Wynne (Partner), Simon Cook (Partner), Luna Owen (Associate) or your usual contact at the firm.

Jacqueline Cook, Of Counsel, and Larissa Head, Trainee Solicitor, sum up the key points of the Electronic Trade Documents Act 2023 (the Act) which will shortly receive Royal Assent and come into force two months later.

What is the aim of the Act?

The aim of the Act is to allow certain documents used in trade and trade finance in electronic form to have the same legal effect as paper documents. Until the Act comes into force, these electronic trade documents are not considered capable of being (physically) possessed under English law to enforce rights to payment of sums of money or delivery of goods on board a vessel or in a warehouse.

Jacqueline Cook, Of Counsel and Larissa Head, Trainee Solicitor, provide an update on the transition away from USD LIBOR with the deadline of 30 June 2023 upon us.

What do market participants in the trade finance industry need to be doing with the limited time left?

For some time now, parties in the trade finance sector have been aware that the use of USD LIBOR was coming to an end as the transition to use alternative Risk Free Reference Rates (RFRs) progresses using the Secured Financing Overnight Rate (SOFR) as the basis for RFRs for USD.

Jacqueline Cook, Of Counsel, sums up the key messages from Sullivan’s May webinar.

Geoffrey Wynne considered what financiers could do if things start to go wrong in a trade, export or project finance transaction and asked participants to consider a few key questions:

1. could you anticipate a fraud;
2. is the financing structure sturdy; and
3. could the structure facilitate mis-selling in any way?   

With these in mind, the message is clear:

1. carry out transaction due diligence before signing;
2. monitor the income generating assets throughout the life of the transaction; and
3. respect the financing structure.

In our April webinar “Risk Mitigation Techniques in Trade Financing Structures”, which I delivered with my colleagues Sam Fowler-Holmes and Maria Capocci, we discussed methods to mitigate risks all the way along the transaction lifecycle. We covered the option of taking charges over the accounts of a Borrower and the funds standing to the credit of such accounts, looking at the importance of the "triple cocktail" in demonstrating the requisite level of control where a lender wants to take the coveted fixed charge. 

Over the course of three days, various speakers from the ICC and beyond came together to discuss digitalisation of trade. With trade bodies including the ICC and ITFA pushing awareness and training in this area, there remains a lot to do to bring more businesses in the supply chain into the digital trade sphere.

Helping to improve awareness, this conference could bring some real momentum to proposed changes in law and practice, so that the clear business case for digital trade can be realised.

If your organisation is both supervised under the UK Money Laundering Regulations (“MLR”) and your UK Revenue exceeds £10.2 million per year, if you are not already, you will need to prepare for the forthcoming Economic Crime Levy (the “ECL”). The ECL aims to raise approximately £100 million per annum to help fund new and uplifted anti-money laundering and economic crime capabilities.[1]