Commentary on sections of the Act Section 3: Possession, indorsement and effect of electronic trade documents Equivalence between paper and electronic trade documents
An electronic trade document should be the same in law as the equivalent paper trade document. Electronic and paper trade documents should have the same legal effect and functionality, and the same rules should apply to both. Further, anything done in relation to an electronic trade document should have the same effect (if any) as it would have in relation to a paper trade document. Sections 3(2) and 3(3) are intended to give effect to these overarching policy intentions.
	Section 3(2) provides that an electronic trade document has the same effect as an equivalent paper trade document. This means that where, for example, a paper trade document can be said to "embody" an obligation (which may be to deliver goods or to pay money) the electronic equivalent has the same legal effect insofar as it also embodies the relevant obligation. The holder of the electronic trade document can enforce the obligation in the same way as a holder of the paper equivalent.
	Section 3(3) provides that anything done in relation to an electronic trade document has the same effect (if any) as it would have in relation to an equivalent paper trade document. For example, where the transfer or delivery of possession of a paper trade document is the means by which the right to claim performance of the obligation embodied in that document is transferred, then transfer or delivery of possession of the equivalent electronic trade document will similarly be required. In other words, the right to claim performance of the obligation embodied in the document, whether in paper or electronic form, is generally transferred by this means and not by assignment or assignation. This is so regardless of the fact that an electronic trade document is regarded as intangible (or incorporeal); as a result of the Act it can nevertheless be possessed. What constitutes a transfer or delivery of possession of an electronic trade document will look different from handing over a physical paper trade document. The transfer of possession will be effected on the system – but the act is the same, that is, transfer of possession rather than assignment/assignation. Assigning the right to claim performance of the obligation would not be sufficient where assignment in relation to the equivalent paper trade document would not be sufficient to transfer the document, and section 3(3) ensures that the effect of assignment in relation to both the electronic and paper trade document is the same. Section 3(3) therefore ensures that the same process of transferring the document applies in relation to a trade document, whether in electronic or paper form.
	A similar result arises in the context of security interests. Certain paper trade documents can be subject to possessory securities (for example, pledge) or non-possessory securities (for example, charge). To effect a possessory security, there has to be a transfer of possession of the relevant paper trade document to the creditor. Because the Act provides for electronic trade documents to be possessed, it will be possible to make them subject to possessory security arrangements. In order to effect a possessory security in relation to an electronic trade document, there has to be a transfer of possession. Anything less would not be sufficient because that action in relation to the equivalent paper trade document would not be sufficient. Section 3(3) therefore entails a transfer of possession of the electronic trade document, and this has the same effect as a transfer of possession of the equivalent paper trade document.
	In addition, any act which amounts to the electronic equivalent of delivery, presentment, amendment, acceptance or rejection, or surrender will have the same effect as it would have in relation to a paper trade document. For example, delivery of a bill of exchange is defined as "the transfer of possession, actual or constructive, from one person to another". Determining what constitutes delivery of an electronic bill of exchange will therefore entail assessing whether there has been a "transfer of possession" of the electronic document. At its most basic, transfer of possession as a matter of fact requires a transfer of control from the transferor. Determining what constitutes "delivery" of a particular electronic trade document will therefore require an assessment of the features of the electronic trade document system in question, and the evidence available.
	These sections are not intended to overcome or circumvent (statutory or other) requirements applicable to paper trade documents. Rather, they are intended to ensure that electronic and paper trade documents have equivalence in all respects, are dealt with in the same way, and that the same substantive law applies to "trade documents" whether in paper or electronic form.