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The 21st Birthday of the Electronic Bill of Lading: With Age Comes Maturity
© 2003
Carsten
Schaal &
Lex e-Scripta,
INTER-LAWYER.com. All Rights Reserved.
The international trade with
goods carried by sea cannot do without the existence of shipping documents, most
importantly with a bill of lading. Traditionally, this bill of lading has always
been issued on paper, which represented a negotiable document of title. As
electronic commerce emerged in the international trading environment and
continues to grow at an ever-increasing rate, the question arose whether the
bill of lading could also be replaced by an electronic medium. The idea of the
electronic bill of lading was born. Since then, a complex controversy cast a
shadow over the actual utilization of such electronic bills, because it has not
yet become clear whether an electronic bill of lading represents sufficiently
the important functions of the paper bill of lading.
International trade could well
do with an innovative and modern form of shipping documents, and therefore an
in-depth look at the electronic bill of lading seeks to find an answer to the
described debate.
Introduction
When trying to find the starting
point of the discussions around the first launches of an electronic bill of
lading, one must name the so-called Seadocs experiment of 1983. Considering
this, it can be said that the electronic bill of lading is well on its way to
celebrate its 21st birthday soon, and, as both legal and technical
obstacles have matured in the past, it is time to move on from the stage of
development to an actual utilization of the electronic bill of lading in
international contracts for the carriage of goods by sea.
The reluctance in the use of
electronic bills of lading in the past was, on the one hand, based on legal
hindrances, such as a lack of conformity with statutory form requirements. These
have mostly been overcome with the application of international legislation and
with the implementation of new United Kingdom (UK) laws.
On the other hand, the
criticisms mainly focused on technical problems, such as the question whether an
electronic bill of lading and its computerized processing including digital
signatures was safe enough for international and world wide trade. A key point
is ‘forgery’ of bills of lading, and it must be noted that falsification of even
traditional bills of lading was always existent. A comparison between the
conventional paper based bills and the modern electronic bills will demonstrate
that a digital signature in an electronic bill of lading is in theory also
capable of forgery – but ‘what gives them their effectiveness is that it is
computationally infeasible to do so’.
The first attempt to facilitate
the trade of goods carried by sea was the mentioned Seadocs (Seaborne Trade
Documentation System)
project. It was supposed to solve problems, which were primary known as delays
due to the late arrival of the bill of lading and higher costs
due to the numerous publishing of paper documents. Seadocs was the precedent of
all electronic bills of lading and was created by the Chase Manhattan Bank and
the International Association of Tanker Owners (INTERTANKO), mainly designed for
bulk shipments of cargoes such as oil.
Because oil cargoes are usually sold quite often, it was important to provide a
central registry where the original shipping documents are deposited and all
subsequent transactions are made via electronic communications.
However, this first and only
partial attempt to replace the traditional bill of lading failed before the
first year of approval was over.
In the 21 years since the 1983
Seadocs failure, a great deal has changed - the law has matured, and e-commerce
and technical computer matters are developing at a breathtaking speed. The UK
Law Commission reports in its advice on ‘Electronic Commerce: Formal
Requirements in Commercial Transactions’ that the global electronic commerce
revenue for 2000 was about $ 286 billion, that it was expected to increase up to
$ 500 billion in 2001 and reach a so far unknown figure in e-commerce of $ 3
trillion in 2004.
Still, it is not only the commercial profit that calls for fast changes towards
e-commerce. Within the last 5 to 8 years an amazingly revolution in the use of
electronic communications suchlike the internet has taken place. A large
percentage of individuals got used to the comfortable and extremely fast way to
communicate via electronic means. Many areas of business and even social
interactions would collapse without the constant availability of communication
systems that operate electronically. Even more, it is foreseeable that this
development will increase as already government bodies and official authorities
offer their services to the public by online-services.
Bearing these future
possibilities in mind, it is obvious that changes must also occur in the field
of international maritime trade, where delays and high costs due to the issuing
of traditional paper bills of lading could be avoided by a replacement of a
modern electronic bill of lading.
Notwithstanding the above, it is
important to remember the particular functions of the bill of lading, as even an
innovative approach of an e-bill by computerized means cannot afford to neglect
the long-established role the bill plays in international commerce. The
indispensable requirements a bill of lading needs to fulfil are namely: the
function as a receipt for the goods shipped, the proof of evidence of the
contract between the shipper and the carrier, and the function as a document of
title.
Without these, a possible model of a bill of lading could never constitute an
acceptable substitute, but only be some kind of straight bill or waybill.
The function of the bill of
lading as a receipt, is of particular importance to the shipper of the goods.
According to Art. III (3) of the Hague/Visby Rules the shipper is entitled to
demand the issue of a bill by the carrier, the master, or the carrier’s agent
showing among other things the leading marks for the identification of the
goods, the number, quantity or weight of the goods delivered and their apparent
order and condition.
The use of the term apparent good order and condition is necessary, as
the master cannot state in the bill that the goods were delivered in actual
good order and condition because he does not know what was hidden from him and,
additionally, he is not deemed to have enough expertise in the quality of the
commodities.
As the ship is obliged to
deliver ‘what she received as she had received it, unless relieved by the
excepted perils’,
the bill of lading is only prima facie evidence for the matters and conditions
recorded in the issued bill.
Therefore, the bill of lading’s function as a receipt can be used by the carrier
as well as the shipper in court for each parties’ allegation on the burden of
proof.
The bill of lading is also
evidence of the contract between shipper and carrier. In this regard it needs to
be emphasized that the contract of affreightment itself is usually concluded
orally
or ‘rarely made with any formality’
long before the bill of lading is signed. When finally it is issued, the carrier
will then print his contractual terms and conditions on the reverse side of the
bill of lading. This final bill of lading, however, does not constitute the
contract itself, but merely provides evidence of it.
The last but unquestionably
the most important feature of the bill of lading is its function as a
document of title. Under practical circumstances, delivery of the goods at the
port of discharge can only be obtained on presentation of the bill of lading.
However, a bill drafted as an ‘order’ bill of lading allows the carrier to
deliver the goods at their destination to a named consignee or to his ‘order or
assigns’.
This function makes the bill of lading a negotiable document, which is necessary
to qualify it as a document of title.
Therefore, the transfer of such a negotiable bill of lading passes ‘constructive
possession’,
which gives any owner of the bill of lading the right to demand delivery of the
goods. Constructive possession means as much as control over the commodities.
This control function of the
bill of lading has a paramount purpose: it represents the goods while in
transit. First, this is important for the owner of the cargo who needs to seek
for a credit at a bank to finance an international sale.
And secondly, it is the only possible way to sell, pledge or mortgage the goods
by dealing with the negotiable and transferable
document instead of the goods themselves when they are still at sea.
These named requirements a bill
of lading needs to accomplish are of essential importance to every contract for
the carriage of goods by sea. In this dissertation, it will be analysed whether
the modern form of electronic bills of lading are able to replace these
qualifications and whether the electronic bill of lading can finally, after 21
years of development, be regarded as a satisfactory substitute for the
traditional bill of lading.
Therefore, the assignment of
this dissertation is, first, to provide a short overview of the advantages an
electronic bill of lading
offers in maritime trade law. The next chapter will then explain how an
electronic bill of lading works in practice. This includes the technical
requirements, an analysis of a digital signature, the procedure of encryption
and decryption via mathematical algorithms, and a comparison of security
matters, namely forgery, with the traditional bill.
Following this, an elaboration
will show that an electronic bill of lading and, accordingly, a digital
signature is in compliance with most of the statutory requirements
imposed by UK, European Union (EU) and international legislation.
A final outlook will then focus
on the Bolero Bill of Lading, which is the most recent example of an electronic
bill of lading. This approach has been developed over the last few years and
takes into account the flaws that appeared in previous electronic bills of
lading.
In particular, the Bolero system is highly recognized because it understands how
to provide a solution for the most important function of a bill of lading – its
negotiability. Now, trading parties that use the Bolero system may already have
a competitive advantage compared to other trading partners that are still
issuing paper bills.
© 2003
Carsten
Schaal &
Lex e-Scripta,
INTER-LAWYER.com. All Rights Reserved.
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