Policy background
International trade involves moving goods across borders in order to get them from the seller to the buyer. This process typically involves multiple actors, including those involved in transportation, insurance, finance and logistics. One trade finance transaction typically involves 20 entities and between 10 and 20 paper documents, totalling over 100 pages. In a transaction covered by a bill of lading, for example, it is common to find 50 sheets of paper in a package of shipping documents that must be exchanged between as many as 30 different parties.
	Despite the size and sophistication of the international trade market, many of its processes, and the laws underlying them, are based on practices developed by merchants hundreds of years ago. In particular, international trade still relies to a large extent on a special category of document that entitles the holder to claim performance of the obligation recorded in the document, and to transfer the right to claim performance of that obligation by transferring (physical) possession of the document. The document is said to "embody" the obligation, which may be to deliver goods or to pay money, rather than merely to evidence it. For example, a bill of lading is a document used in the carriage of goods by sea which, when transferred to a buyer (or any subsequent lawful holder), gives that holder constructive possession of the goods described in the Act, and a right to claim delivery of them from the carrier.
	The law governing these documents is premised on the idea that they can be physically held or "possessed". For example, in the Bills of Exchange Act 1882 (which applies to promissory notes and bills of exchange), the terms "bearer", "holder" and "delivery" are defined by reference to possession. The existing law in the United Kingdom did not recognise the possibility of possessing electronic documents given their intangible nature; possession was associated only with tangible assets. 1
	Industries using these documents were therefore prevented by law from moving to a fully paperless process. To give a sense of the enormous amount of paperwork international trade generates, consider that the world’s largest containerships can carry 24,000 twenty-foot containers at any one time on any one voyage. For each one of those cargoes, paper transport documentation has to be produced, and must be processed manually to go from the shipper of the goods to the ultimate buyer at destination, sometimes through numerous intermediaries. Because electronic versions of the relevant documents could not be possessed, much of the documentation had to be in hard copy. The Digital Container Shipping Association ("DCSA") estimated that 16 million original bills of lading were issued by ocean carriers in 2020, and that more than 99% of these were in paper form. 2