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.
Key themes from the conference
One of the overarching themes was collaboration on an international scale between governments and businesses whether regulated, incorporated or not. Another key aim of the conference was to illustrate practical applications of technologies in the market.
THE KEY TAKEAWAYS WERE AS FOLLOWS:
The Digital Trade Roadmap discussions focussed on:
- legal changes and whether countries should adopt the UNICTRAL Model Law on Electronic Transferable Records (MLTR), or make their own similar laws or appropriate amendments to deliver the same effect as MLTR;
- the rules on how digital trade should be carried out, citing the ICC Uniform Rules on Digital Trade Transactions (URDTT) as a helpful example;
- the publication, and adoption, of standards for digital trade and which to adopt; and
- the interoperability of legal systems, together with technical systems and platforms.
It is clear that MLTR is not enough on its own and international practices and standards on how to play – and adjust - trade finance are also essential.
Alignment is the key to smooth the mechanics of the supply chain and provide trade finance to a wider business base, including SMEs.
Legal systems are not in alignment with technology at the moment. However, things are changing. Some countries have adopted MLTR, while in the UK, the Electronic Trade Documents Bill is currently going through Parliament and, once enacted, will affect international contracts governed by English law by enabling digital trade documents to be possessed (see our previous blog post on this topic here). Platforms and technology, panellists suggested, do not have to be identical to be interoperable. So, the industry does not have to have a ‘one size fits all’ system to get digital trade moving, it is having interoperability at key points which is essential.
Is there a business case for Legal Entity Identifiers (LEIs)?
The panel for this session was clear that there is a business case for adopting LEIs, a code that is unique to a legal entity, consisting of a combination of 20 letters and numbers, which allows each entity to be identified on a global database of entities searchable by number instead of by name, as many entities may have similar or the same name. Examples of how it is beneficial from a Know Your Customer (KYC) perspective were given, including: the ability to access quality and verifiable data; the need for quality data for automation; cost; efficiency and risk reduction. The need to know with which entity one is dealing, and contracting, is a first step in KYC, Anti-Money Laundering (AML) and the verification of counterparties, which means that having an LEI could become essential, although it has not yet become a compulsory legal requirement.
Techo-legal assurance for digital trade
Panellists on the technical side were keen to demonstrate that the technology is already available to enhance digital trade and trade finance. They provided examples of electronic trade and trade finance platforms, security for IT and technology systems, as well as cybersecurity, with new solutions emerging, for example, for e-bills of lading, e-customs and data capture. The key here is to have pilot schemes, some of which are already in progress, and to build user confidence to make sure that systems are not prone to cybersecurity, loss of data or loss of control of the trade document.
The legal framework is changing and English law is expected to enable digital trade and trade finance by early summer 2023 with the passing of the Electronic Trade Documents Bill. It will then be up to the trade and trade finance world to take the initiative, with the legal and technology tools available, to change the industry into a more efficient, collaborative digitalised environment.
Overall, the conference demonstrated what could happen and needs to happen to get digital trade and trade finance moving. We need different market participants working and discussing together how to progress the digitisation of trade. This could be just the start of such collaboration of different professions within the trade industry. Watch this space!
Sullivan is at the leading edge of legal advice in relation to the use of digital banking in trade finance platforms. Since the start of 2021, we have seen an exponential rise in the need for virtual trade finance solutions, and the firm continues to advise clients and industry bodies in relation to their innovative transactions and related issues including digitalisation and the use of fintech in trade and commodity finance. Please contact Geoffrey Wynne or your usual Sullivan contact for further details.
