Important Update To ITFA’s Digital Negotiable Instruments Handbook

ITFA is today launching an important update to its Digital Negotiable Instruments Handbook, the second edition of which was published in 2021. The Addendum deals with some of the consequences arising from the passage of the United Kingdom Electronic Trade Documents Act 2023. This law is a major step forward in enabling the creation of electronic trade documentation, including bills of lading, bills and exchange and promissory notes, governed by English law.

The Addendum gives practical help on how to adapt traditional forms of bills of exchange and promissory notes to handle the requirements of the Act. These changes include:

• Inserting an English governing law clause (and a jurisdiction clause if required)
• A conversion from paper clause where this is needed
• An undertaking to make payment to the holder of the note
• An agreement between the parties that the system used to create/register the digital asset is a reliable system for the purposes of the Act

The last provision is expected to only be needed for a short time but gives some certainty on what is currently an untested point.

We have also updated our dDOCS standards for systems/vendors digital negotiable instruments who will now be required, in order to meet the standards, to show, amongst other things, an ability to prove reliability of the relevant system in a legally satisfactory manner and to present and transfer the instruments.

We are pleased to note that the dDOCS standards have been accepted by the World Trade Organisation and ICCDSI in its latest report on “Key Trade Documents and Data Elements” available here as the key global standard for bills of exchange and promissory notes.

ITFA is continuing to try to bring clarity to the issue of what constitutes a “reliable system” for the purposes of the Act. It is working with ICC UK and C4DTI to bring in a certification system but it should be noted that certification is not the only means to prove a system is legally “reliable”. At a recent conference, moderated by distinguished jurist Lord Thomas of Cwmgiedd with English High Court judge Mr. Justice Peter Fraser, Professor Sarah Green (who led the Law Commission work on trade assets which culminated in the Act) and Professor Miriam Goldby, at which our chair Sean Edwards also spoke, the view was that the standard required by the Act was not meant be higher or more difficult to prove than respectable systems can demonstrate today. There is no “trap for the unwary”. ITFA is seeing an increasing number of legal opinions backed up by technical information and regards well-drafted and properly corroborated opinions as a practical and legitimate way forward.