Anyone who has spent time in the oil business knows the letter of indemnity deeply. It exists for one simple reason: on many tanker voyages, particularly short ones such as the Middle East to South Asia, the cargo ship reaches the discharge port before the original bills of lading do. The cargo is then released against a letter of indemnity instead of the actual unavailable control document. It seems preposterous that a multi-billion-dollar industry still relies on a workaround for slow couriers and is telling of how deeply paper remains embedded in trade.
You may wonder, why in 2026, we cannot simply email these documents. The answer lays not in technology, as electronic bill of lading platforms have existed for over two decades. But rather in a legal quagmire, going back to the archaic legal construct of real possession.
A document you have to hold
A bill of lading is much more than a receipt for cargo, rather it is the formal title of ownership. Whoever holds the original controls the goods, and thereby only the holding bank is securitized. Bills of exchange, promissory notes and warehouse receipts work much in the same way. Their legal force comes from being physically held or handed over, with an endorsement where required.
English law, which governs a large share of international trade documentation, has never accepted possession of something intangible. In OBG Ltd v Allan [2007] UKHL 21, the House of Lords refused to extend the tort of conversion to intangible property. In plain terms, an electronic file- however secure, could not be “held” in the way a paper bill is.
However electronic platforms got around this with contracts – wherein every user signed up to a rulebook consenting to treat the electronic record as if it were paper. That works perfectly well until external parties become involved, whether a new buyer, a second bank or a court in another jurisdiction; because they never signed the rulebook and are not bound by it. When a bank lends against cargo, this isn’t a small oversight – it constitutes the core of the arrangement.
The fix: Control instead of possession
In July 2017, UNCITRAL adopted the Model Law on Electronic Transferable Records, known as MLETR. Bult around the straightforward idea that instead of possession, the law looks at control of an electronic record held on a reliable system, and gives that control the same legal effect as holding the paper original.
While adoption has been more than slow. According to UNCITRAL’s own status page, legislation based on or influenced by MLETR has been implemented in 13 states. These include Bahrain (2018), Singapore, Abu Dhabi Global Market[1] (2021), UK (2023), France (2024), China and Mauritius (2025), (albeit Chinese law limits to only BL and Mauritius’s only to B/E).
The UK Act
In my opinion the United Kingdom’s Electronic Trade Documents Act 2023 is the best example of how this should be done. With Royal Assent it came into force on 20 September 2023 and is only eight sections long. Allowing a person to “possess, indorse and part with possession of” an electronic trade document, with the same effect as the paper equivalent.
Importantly, the Act does not pick a technology. Section 2 instead sets out what a “reliable system” must achieve. It must:
- Identify the document so that it can be distinguished from any copies.
- Protect it against unauthorised alteration.
- Make sure that only one person can exercise control of it at any one time.
- Allow the person in control to demonstrate that they are in control.
- Make sure that a transfer takes control away from the previous holder.
It is the third and fifth tests that truly count. They reproduce in software the single quality that has made paper valuable for centuries, that an original cannot be in two places at once. While a scanned PDF obviously fails that test, a properly designed registry can pass it.
The UK government’s own impact assessment put the net benefit to the UK at £1.14 billion over ten years. The Law Commission, which drafted the bill, cited an estimate that container shipping alone generates 28.5 billion paper documents a year!
So why are we still using paper?
The container lines have made their commitment. In February 2023 the nine carriers in the Digital Container Shipping Association, including MSC, Maersk, CMA CGM and Hapag-Lloyd, committed to issuing 50% of their bills of lading electronically within five years and 100% by 2030. DCSA estimates that of the roughly 45 million bills of lading issued annually, only 1.2% were electronic in 2021. Furthermore, they represent only container lines whereas tanker and bulk trades, the foundation of oil trade, unfortunately remain absent from that commitment.
In my view three problems are holding things back, and all three matter more to the banks than to the carriers.
The first is that a digital bill is only as good as the weakest jurisdiction it passes through. Most trading economies are absent from UNCITRAL’s list, and those having their own electronic records
1ADGM is a financial free zone, not the UAE as a whole laws do not always mutually recognise another’s. UNCITRAL itself acknowledges that MLETR does not settle the question of each country’s legal jurisdiction.
The second is that the platforms do not talk to each other. Two banks using different electronic bill of lading systems cannot pass a record between them without some kind of bridge, and it will take more than simply regulation to fix that.
The third is the letter of credit itself. A credit must expressly allow electronic records. The ICC’s eUCP rules2 provide the framework, however they apply only when explicitly incorporated via the credit.
What should happen now
Banks should look again at their LC templates, security documents and governing legal clauses and ask whether they can actually accept an electronic record. In several major hubs the law now allows it, and the real obstacle is very often internal policy.
Traders should note that choosing English, Singapore or ADGM law for their documents and financing now carries a practical advantage and not just a familiar one.
For other countries standing on the sidelines – the risk is obvious. As trading partners move to electronic documents, those who delay risk turning into paper bottlenecks. Implementing reform is affordable – the real cost lies in failing to act.
For twenty years the industry asked technology companies to solve what was really a legal problem. The law has now moved in the places that matter most. What remains is getting banks, carriers and governments to move cohesively, and that seems to remain a question of will rather than ability.
References
- UNCITRAL, Status: Model Law on Electronic Transferable Records (2017)
- Electronic Trade Documents Act 2023, legislation.gov.uk
- UK Government, Electronic Trade Documents Bill: impact assessment
- Law Commission, Electronic trade documents recommendations implemented
- City AM, Law Commission consultation on electronic trade documents
- DCSA, Member carriers commit to a fully standardised electronic bill of lading by 2030 (15 February 2023)
- ICC Digital Library, eUCP 2.1 and ISBP 821 updates (July 2023)
About the Author:
Adnan’s expansive career is anchored in over two decades of leading ventures across high-stakes sectors including global trade, energy, and infrastructure. His strength lies in uncovering inefficiencies and converting them into strategic advantage through fundamental systems thinking.
1eUCP rules – version 2.0 from July 2019, updated to version 2.1 in June 2023
This leadership mindset led him to build a company focused not on AI hype, but on sovereign AI solutions engineered for measurable impact. Clients trust the edge he brings: as a leader fluent in both boardroom strategy and technical execution, uncompromising on quality and ethics.
Adnan’s academic foundation includes the impressive London School of Economics and as a graduate of leadership development through the elite Harvard Business School YPO-HBS Presidents Program. He can be reached at https://aigenics.ai
