Author: Sharon Juwah
Keywords: Electronic Bill of Lading, Shipping, Cross-border Trade
The most important document since the beginning of international trade transactions is the Bill of Lading. The ‘Hamburg Rules’[1] defines a bill of lading in Article 1, as “a document which evidences a contract of carriage of goods by sea and taking over or loading of goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document”.
The Halsbury’s Laws of England at paragraph 1532 also defines the bill of lading, laying emphasis on execution by the owner of the goods. The Nigerian Courts in the case of Mediterranean Shipping Co S.A & Enemaku & Anor[2] describe a Bill of Lading as ‘a writing signed on behalf of the owner of the ship in which goods are embarked, acknowledging the receipt of the goods, and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the bill of lading’.[3] The Supreme Court affirmed this description in the case of Pacers Multi-Dynamics Ltd v the M.V Dancing Sister & Anor[4], placing emphasis on the bill of lading being an enforceable contract.[5]
It is therefore a document issued by the carrier of goods, to be transferred from the seller to the buyer.[6] It is also a document of title which confers certain legal rights to the holder of the document, such as the right to transfer his title in the goods and the right to use the document as collateral for a loan. Just as the bill of lading confers rights on the holder, it also confers liabilities in relation to the goods. The question of whether these rights and liabilities are replicated if the bill of lading is issued in electric form, shall be examined in this work.
ELECTRONIC BILL OF LADING AND ITS IMPLICATION IN MODERN SHIPPING
The technological advancement around the world has in no way exempted the shipping industry. An electronic bill of lading (or e B/L) is the legal and functional equivalent of a paper bill of lading. The electronic bill of lading must digitize the core functions of a paper bill of lading, namely its legal acceptance as a receipt, as evidence of or containing the contract of carriage and as a document of title.[7] Technology has shown that the traditional (written) bill of lading is riddled with quite a number of shortcomings, hence the introduction of the electronic bill of lading.
Discharge at Ports
One of the problems of the traditional bill of lading is that it must be presented at the discharging port. This is of course an understandable requirement considering that the goods must be handed over to the rightful owner and not an imposter. However, there are known instances where the cargos have arrived before the bill of lading. In such situations, the cargo is then delayed until the bill of lading has been received and can be presented, ships have been known to be reluctant and sometimes unwilling to wait in situations like this, because neither party to the contract is willing to pay for warehouses, port dues and or demurrage.
Technological advancement in shipping- such as containerization- have resulted to a decrease in the estimated time frame for transportation, giving less time for the bill of lading to reach the receiver at the discharge port, receivers have therefore had to resort to a letter of indemnity in an attempt to bridge this gap.
Bureaucracy
Bureaucracy is another problem of the traditional bill of lading. There are too many documents to be obtained when it comes to the carriage of good by sea, such as the bill of sale, customs clearance, letter of credit etc. the issuance and process of these documents result in a long and expensive transportation chain. The need for modernization and paperless trade therefore seems feasible.
Fraud
Another problem with the traditional bill of lading is fraud. Bills of lading are usually executed in sets of 3 or 6 originals and the consignee is only required to present one original to take delivery of the cargo. Usually, a fraudulent endorser could send only part of the set, leaving room for him to execute the remaining set, in favour of innocent third parties who believe they are giving value to acquire interest in property. Moreso, a fraudster with no right to the cargo could claim such cargo after laying his hands on any of the copies in the set of the bill of lading. The requirement for writing is one susceptible to mistakes that may be impossible to correct or even expensive to correct in the event that bills have to be sent back and forth in order to be corrected.
The advantages of an Electronic Bill of Lading
From the above, it would seem that the traditional bill of lading is riddled with too many deficiencies and the electronic bill is the only solution. In fact, scholars such as Paul Todd have said that “there is no choice other than welcoming the use of electronic bills of lading”. An electronic bill of lading functions the same as the traditional except that it is in digital form and therefore quicker, safer and cheaper.
Examples of electronic bills that have been developed are; Seadocs, Bolero, and EssDocs. The electronic bill presents several advantages one of which is speed. The speed of transfer means that an electronic bill can pass through multiple hands and still be at the discharge port when the vessel arrives removing the need for cost and letters of indemnity.
Electronic bills reduce the cost and time spent on dealing with inevitable errors because they can easily be cancelled and re-issued. The risk of fraud is also reduced by audit trails, electronic signature, and PIN numbers which make it difficult to forge an electronic bill.
LEGAL ISSUES WITH THE ELECTRONIC BILL
In-applicability as a Document Of Title
It is important to state that the law on the use, form, admissibility and applicability is to a large extent, ambiguous[8]. For instance, the Carriage of Goods by Sea Act (COGSA) 1992, expressly makes provision which regulates issues concerning privity of contract in contracts of carriage, which automatically addresses the question of proper parties to a lawsuit in the event of damage to the subject of carriage. Section 15 of the Act authorises the Secretary of State to extend the provisions of the Act, with regards to privity, to paperless transactions, but there is no law which puts this into effect. The absence of laws which properly provide for privity of contract in electronic transactions, imply that documents arising from such transactions cannot properly be regarded as documents of title. Arguments have however been made stating that in the absence of laws providing for privity of contract, common law principles should apply.
Fraud And Cyber-Attacks
Electronic bills of lading are becoming exposed to new risks, such as the risks from hackers. In Mediterranean Shipping Company v. Glencore[9] the possibility of cyber-attack was recognised, where in this case, the PIN for an electronic delivery system was misappropriated by a cyber-attack. The vulnerability against fraudulent practices is one every holder of an electronic bill of lading is constantly aware of. Although, protective measures may increase with time, there is always the risk of hackers finding the loophole in new protective measures.
In addition to the above, a transfer of the traditional bill of lading automatically means the transferor is conferring possessory (including delivery) rights on the transferee. It is unclear if the same legal implications apply in the case of an electronic bill of lading or if the holder of the bill will be liable to forfeit his goods in the event of an illegal transfer.
Lastly, before the electronic bill of lading can be considered legally and commercially effective, it must be unique and secure[10]. This means that it must be traceable to only one holder at a time and in case of multiple transmission, the chain of transmission must be traceable and easily identified. The risk of copy must also be eliminated, because this can affect the ability to trace transmission. An example is where the bill of lading is in a PDF format, anyone can easily hijack such a document for his own use.
Mis–description
A bill of lading is a document of title and a negotiable instrument, it is of utmost importance that the information contained therein is correct, especially those regarding the quantity and condition of the goods to be shipped. Misdescription occurs when these facts are not properly represented.
Misdescription of goods can occur for a number of reasons. The nature of the good which includes the quantity, identifying marks and value of the goods could be mis-declared by the shipper when providing the necessary information to the carrier. The shipper could misdescribe the goods in order to get a lower freight rate or to comply with the terms of the underlying contract of sale or even to avoid restrictions imposed by customs. Misdescription could therefore be an honest mistake or a deliberate attempt at evading liability. To a large extent, the shipper bears the liability for misdescription.
It should be noted that misdescription as it were being mainly a problem plaguing the traditional bill of lading and the electronic bill of lading, cannot be so easily manipulated in the case of wilful misdescription. Likewise, where it is an honest mistake, such a document where it is electronic can easily be cancelled or disregarded and another issued in its stead.
Electronic Signature
The Electronic Bill of Lading requires execution by either the carrier, his agent or the captain of a ship or his agent. Manual Signatures are craved in the business landscape of Nigeria and are seen as superior to electronic signatures. Interestingly, Article 14(3) of the Hamburg Rules[11] (alongside many new legislation) acknowledges electronic signatures are valid.
In England, The Electronic Communications Act 2000 (the “ECA 2000”) provides a statutory framework for the admissibility of electronic signatures in England and Wales as evidence in any legal proceedings. More recently, the validity of electronic signatures has been formally recognized in the EU by The Electronic Identification and Trust Services Regulation (910/2014/EC) (“eIDAS”). Consequential provisions supporting this regulation were implemented into English law by the Electronic Identification and Trust Services for Electronic Transactions Regulation 2016 (No. 696).[12]
The Electronic Signature Act[13] has made it possible to incorporate signatures into the electronic bill of lading, for added authenticity. Section 7[14] states that “an electronic signature is admissible evidence in relation to the authenticity or integrity of the data or communication concerned”. The Electronics Communication Act 2000 provides the statutory framework for the admissibility of electronic signatures in England and Wales. This means that documents with electronic signatures will be admitted in English courts. The European Union further addressed this issue through the Electronic Identification and Trust Services Regulation[15] (elDAS) which was later adopted into English law through the Electronic Identification and Trust Services for Electronic Transactions Regulation[16]. However, an electronic signature will only be recognised in English courts if it is similar to the person’s signature on paper[17].
Incapable Of Functioning As A Negotiable Instrument
Apart from misdescription, an electronic bill cannot properly function as a negotiable instrument. The traditional bill of lading can easily be tendered in exchange for some other goods or services of equal value. The electronic bill of lading however, is intangible, this makes it difficult to regard it as a document of title which can be used in negotiation.
Loss Of Data
There is also the unpredictability of computer systems. In the event that a system collapses and data is lost, copies of the electronic bill of lading may need to be referred to, this can create legal issues on the basis of admissibility or authenticity.
Uncertainty In State Laws
In Brazil, by virtue of the “Ajuste SINISEF no. 09 in October 2007” (Brazilian electronic bill of lading regulation), paper bill of lading was substituted for the electronic bill of lading. However, only electronic bills of lading issued and registered in the Brazilian Federal Revenue System are recognised. Also, in the United Arab Emirates (UAE), electronic bills of lading are recognised, by virtue of Federal Law of 2006 concerning E-transactions and E-commerce (the E-Commerce Law). The law was formulated to aid the efficiency of electronic transactions and commerce. Article 4 of the law recognises the legal validity and enforceability of electronic documents, such as the electronic bill of lading. However, there is no case law to measure the actual applicability of this law.
THE WAY FORWARD
Recently, the result of several research has suggested Distributed Ledger Technology (DLT), also referred to as “Blockchain” as the future of digitalised international trade, due to the possibility of creating personalised data. It is however unclear how this technology hopes to manage multi-party transactions which will involve the transfer of the bill of lading from its original holder to subsequent holders. Certain protective measures such as the use of Barcodes, Passwords and Pins, could be employed to better address to this issue.
CONCLUSION
As indispensable as the electronic bill of lading appears to be to modern marine businesses, it is sad that it does not enjoy a wide application, not because these companies do not realise its importance, but because a lot of them are wary because the electronic bill of lading is yet to enjoy a wide legal adoption, due to this, the consent of a large number of stakeholders is still being withheld across the industry.
With a view to the widespread use of electronic shipping documents, two characteristics of the evolution of the bill of lading may be emphasized. First, the evolution of the bill of lading into its current form was a process that took place over many years. Only when the need arose for the bill of lading to be a document of title in addition to being a receipt and evidence of the contract of carriage, did the bill of lading eventually become a document of title.
This
long period of development is not a luxury that any electronic bill of lading
will have. There seems to be an immediate need for such an electronic bill of
lading, but there is no practice of merchants over many years that developed
rules and customs governing such an electronic bill of lading. Currently a
comprehensive contractual framework or regulations in terms of legislation will
be necessary to implement any form of an electronic bill of lading in order to
fill the legal vacuum.
[1] United Nations Conference on the Carriage of Goods by Sea 1978
[2] (2012) LPELR-9253(CA)
[3] B.M Ltd v Woermann- Line. See also Ardennes (Cargo Owners) v Ardennes (owners) (1951) 1 K.B 55
[4] (2012) LPELR-7848(SC)
[5] See also the cases of Adesanya v Leigh-Hoegh (1968) 1 ANLR p 330; Allied Trading Co Ltd v G.B.N Line (1985) 2 NWLR pt 5 p74
[6] See Article III, Par 6 Carriage of Goods by Sea Act
[7] https://combined-transport.eu/electronic-bill-of-lading#:~:text=An%20electronic%20bill%20of%20lading,as%20a%20document%20of%20title. accessed 10 Jan 2021
[8] Vasieleios Ziakas, “Challenges Regarding the Electronic Bill of Lading” (2018)
[9] (2017) ECWA Civ 365
[10] ICC, “The Legal Status of Electronic Bills of Lading”, A Report for the ICC Banking Commission
[11] See Carriage of Goods by Sea Act
[12] https://iccwbo.org/content/uploads/sites/3/2018/10/the-legal-status-of-e-bills-of-lading-oct2018.pdf accessed 10 Jan 2021
[13] 2000
[14] Electronic Commissions Act, 2000
[15] 910/2014/EC
[16] 2016 (No. 696)
[17] ICC (Supra)
