Commentary on sections of the Act Section 3: Possession, indorsement and effect of electronic trade documents Possession and indorsement of an electronic trade document
Section 3(1) provides that a person may possess, indorse and part with possession of an electronic trade document. This section is intended to remove the legal blocker that historically has prevented trade documents in electronic form from being possessed. As a result of this section, electronic trade documents are capable of possession.
	The Act does not set out what constitutes possession of an electronic trade document. Since possession is a relative and fact-specific concept, what constitutes possession of an electronic trade document in any particular context will be assessed as a matter of common law. The common law approach to establishing possession as a matter of fact considers two elements: factual control and intention (see for example The Tubantia (No 2) [1924] P 78; Mainline Private Hire Ltd v Nolan [2011] EWCA Civ 189; [2011] CTLC 145). Who has possession of something at any one time will therefore depend on the type of control they have in respect of it and their intentions in relation to it, assessed against the control and intentions of other people who may also have a claim. Although existing case law concerning possession relates to tangible assets, many of the principles are capable of application to electronic trade documents.
	Although possession is often described in terms of exclusive control, the existing common law admits many situations in which more than one person has control of a tangible asset. Exclusivity means one person, or group of persons acting in concert, can exclude others from having control of that object. Exclusive control is not the same as singular control. Control may be consensually shared (for example, where multiple people acting together all have knowledge of the relevant private key and any one of them may use it in furtherance of mutual objectives). In other cases, control may be concurrent but the persons who have control are acting independently (for example, where multiple people have knowledge of the relevant private key or security credentials facilitating control of an electronic trade document). Control may also be joint (for example, in a multi-signature arrangement as described above). The important feature of exclusive control is the ability it provides to limit access and use; it is not nullified simply by virtue of being widely shared on any given set of facts.
	Intention is an integral part of the enquiry whether a document is in fact possessed by a particular person. Whether a person with the ability to control an electronic trade document has the requisite intention to possess it will depend on the facts of the case and the evidence available as to their state of mind. Their intention may also need to be assessed relative to that of others.
	Parties may also have other possessory interests in electronic trade documents, including legal possession (being the right to possess rather than possession in fact). The range of potential relationships between persons and electronic trade documents is analogous to that between persons and paper documents (or indeed any other tangible object).
	Section 3(1) provides that a person may part with possession of an electronic trade document. The Act does not specify what amounts to a transfer of possession. However, section 2(2)(e) (the divestibility criterion) ensures that when a person transfers an electronic trade document (meaning the electronic equivalent of handing over a piece of paper), the transferor necessarily loses the ability to exercise control of the document. So too do all the people who shared the ability to exercise control of the document with the transferor (unless they are themselves a transferee). Transfer of (factual) possession of an electronic trade document therefore entails a loss of control by the transferor. To gain possession, the transferee(s) must have the requisite intention to possess the electronic trade document. Depending on the circumstances, the transferor may retain some rights over the document, for example, if the document is released to a debtor subject to a trust in favour of the creditor.
	Section 3(1) further provides that a person may indorse an electronic trade document. Indorsement is an essential part of the transfer of many trade documents and any rights which attach to them. Indorsement is an annotation in writing on a document of title instructing that the obligation recorded therein be performed to the order of a named person or simply "to order". There is a business practice of indorsing paper documents on their reverse, which reflects the origins of the word "indorsement": the Latin "dorsus", meaning "back". Unlike a paper document, an electronic document may not have a "back". The purpose of providing expressly for indorsement of an electronic trade document is to ensure that an electronic indorsement will be valid regardless of where it is located on the document.