Possession and tangibility are closely related concepts long established under English law. Yet a change to these concepts is around the corner. The change could finally unlock the full potential of digital trade documents, while at the same time keeping English law at the forefront of global commerce.
The existing position under English law is that one cannot legally ‘possess’, or have physical control of, something intangible (not including intellectual property rights, which are governed by separate rules). This means that a purely electronic or digital trade document cannot be possessed, and so cannot fulfil the legal functions of its possessable paper equivalent. But the UK Law Commission’s recent proposals for the reform of English law regarding possession of electronic trade documents and the accompanying draft legislation (the Draft Bill) suggest that more universal digitisation of electronic bills of lading and other trade documents will soon be a reality.
Electronic trade documents, at least in the form of ‘e-bills’, have been in use for almost two decades due to their undisputed benefits and efficiency. However, they remain, as the Law Commission puts it, “workarounds” to the problem of intangible, digital documents not being capable of possession under English law. This is primarily because electronic documents are created under multi-party contracts between a closed group of parties engaged in a particular trade that agrees to recognise them as having the same qualities as a paper document.
What the Law Commission’s proposals seek to address is the “possession problem”, a timely example of English law keeping up with technological solutions (including blockchain) to give electronic trade documents the same legal function as their paper equivalents.
What does the new law say?