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Bills of lading and their multifunctional nature in a fast-paced world

Living in a world where everything is constantly developing and gradually advancing, the changes impacting international trade and the shipping industries: the introduction of paper bills of lading in the 14th century and the new technological advancements that have now brought the electronic bills of lading; cannot be ignored.

In determining what a bill of lading exactly is, it is quite essential to note that it is a document that was for quite some time considered to be just a ‘receipt’. As global trade is intensively and constantly developing, the parties’ interests: the carrier’s and shipper’s in a contract of carriage; are always changing.

Article 1(b) of the Hague-Visby Rules 1968 entails that a bill of lading is a document that regulates relationships of the marine industry, e.g. between the carrier and the shipper. This means that it regulates situations of any detected defect or breach of contracts.

The Carriage of Goods by the Sea Act 1992, in the United Kingdom, went further to specify what ‘document’ clearly means and falls under the definition of a bill of lading. Section 1(2)(a) states: ‘References in this Act to a bill of lading (a) do not include references to a document which is incapable of transfer either by indorsement or, as a bearer bill, by delivery without indorsement.’

In this regard, more shippers adapted to the interest of transferring cargo rights through indorsement, by selling goods while in transit. This is more evident in the oil industry, e.g. for profits or in mitigating the losses that could arise in case the value of the goods diminished while in transit. This was favourable in the 19th century because back then ships took longer to arrive at their destination.

The current shipping times cannot be compared to those of the past, and as evidence from 2019 suggests, states like Greece, Japan, the USA and the United Kingdom ranked high among the top 10 ship owning states, as documented in the Maritime Executives Report.

Clearly, times change, with the world being fast-paced with increased ships and advanced vessels. As a result, the cargo is likely to arrive before a paper bill of lading. This is because paper bills of lading are dependent on transport services to reach the consignee, and this can prove to be a quite costly and slow process, notwithstanding that in-transport risks of fraud can indeed be seen as another challenge.

As a solution to the challenges raised over paper-based bills of lading comes the introduction of electronic bills of lading. The Rotterdam Rules as drafted in 2008, under Article 1(18) entail an advanced development in new forms of bill of lading, acknowledging the use of electronic bills of lading as electronic transport records issued by a carrier in a contract of carriage between the carrier and shipper in this regard.

The article ‘E-bills of lading’ on Lexology comments on the issues an electronic bill of lading aims to solve: e.g. by being a faster medium as it is transferred online, it is cheaper, less attractive to fraud, and limits those situations where the consignee seeks a letter of indemnity from a financial institution to be issued the cargo by the carrier. Hence, to avoid more expenses of demurrage which may arise from spending all the laytime allocated by the carrier from the time the ship is at berth waiting for the unloading of the cargo.

It is to be highly noted that electronic bills of lading will help to reduce demurrage claims filed by carriers due to late unloading caused by delays on the arrival of paper bills of lading. Cases like the Spalmatori, show how demurrage can count as a sole advantage to the carrier in attaining damages from the shipper if there are delays in the unloading of cargo.

A comparative analysis by function of the paper and electronic bills of lading in international trade transportation

- First function

They act as evidence of facts. In simple terms, the above means that the document itself, in being a bill of lading, will be sufficient to prove if the cargo has been tampered with or negligently handled. This will then lead the cargo owner to institute a cargo claim because they will refer to the conditions of the consignment before shipment in case a clean bill of lading is issued. On that note, any severe damage amounts to a cargo claim as per Article 3 (3)(c) of the Hague-Visby Rules which requires the condition of the goods to be stipulated in the bill of lading.

In reference to the electronic bill of lading, it meets the same function as paper bills following the insight of the legal briefing on ‘Electronic bills of lading’ (UK P&I Club). Borello, a system issuing electronic bills of lading operations, offers to carriers and shippers recognition codes that cover securely their identities followed by a sample of an electronic bill of lading.

Further, both parties: the shipper and the carrier; consent for the facts to be stated in the bill of lading. This indeed shows how both are similar in this function as they act as evidence of facts and as a receipt of carriage, serving as indisputable evidence in case of any infringement.

- Second function

They act as evidence of a contract of carriage. This is another function of a bill of lading, as evident in the case of Zhongcheng Ningbo Import and Export v Shanghai Asia Pacific International Containership Warehousing and Transport Co. Ltd. In this case, the holder of a bill of lading was unable to produce an original copy of the bill of lading. They lost the case because the Court ascertained that there was a possibility of another holder, hence it ruled that the claimant did not have the right to sue based on the contract of carriage. This case shows how important a bill of lading is, as it can be shown to evidence an existing contract of carriage and its constituting parties.

In another comparative angle, electronic bills of lading meet the same confirmation as seen in Glencore. In that case, the fact that the codes worked well for some years showed that there was an existing contract of carriage relationship. Hence, this case is proof that once the shipper has secure codes to claim the cargo and received the electronic bill of lading, the latter acts as supporting evidence to show that the shipper and the carrier are in a contract of carriage. Accordingly, any party can claim any defaults.

- Third function

They act as a document of title in the goods. In elaboration, this amounts to the ability of the document to be negotiable. The Carriage of Goods by the Sea Act 1992, under section 1 (2)(a) provides that the document must be negotiable through indorsement, as seen in the case of Lickbarrow v Mason [1791].

While the transfer of title in cargo seems quite a challenge on electronic bills of lading, systems like Bolero are evading the application of the Carriage of Goods by the Sea Act 1992 because the electronic bills of lading issued do not meet the requirements of the Act but instead apply the principle of novation.

For many countries like Japan, the United Arab Emirates, and the UK, the transfer of property through electronic signatures still requires witnesses to sign the contract. For instance, in the UK, section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 provides that a title deed must be signed in the presence of witnesses to be legally valid. This creates a gap as electronic bills of lading are highly dependent, according to e-title systems, on electronic signatures and fail to meet the same standards internationally in terms of property laws posing difficulties for e-signatures.

- Fourth function

They act as instruments that transfer rights and liabilities to parties that were not part of the original contract of carriage. This entails the right of third parties to sue based on the original contract the bill of lading refers to. As the case of Brandt v Liverpool shows, upon transfer, the third party assumes the same terms to the original contract which, in this case, gets the right to sue if a breach occurs.

Having a lack of international laws and the fact that the Hague-Visby Rules are becoming outdated, electronic bills of lading are only accorded the same status as paper bills of lading when it comes to confirming title to the goods. As electronic bills of lading do not confer third party rights, this results to a more complicated reality as far as third-party disputes are likely to arise.

Final thoughts

In reality, it is essential to note that innovative systems like Bolero with electronic bills of lading find it hard to take on the same functionality of paper bills of lading, simply because they only meet two functions: they are a receipt for the transfer of goods under the contract of carriage and stand as evidence of the contract of carriage.

It is essential to note that the Rotterdam Rules have not yet come to force, hence the electronic bills of lading have a long way to go until they reach universal acceptance because there is no uniform global legal framework, even though the UNCITRAL has attempted to do so by enacting the Model Law on Electronic Transferable Records 2017. This instrument is not binding but acts as a guide to national jurisdictions to enact electronic document laws. As the Hague-Visby Rules 1968 do not address electronic bills of lading due to being highly outdated, they are still applicable in high global coverage.

An important issue electronic bills of lading face is exposure to hacking. The Computer Misuse Act of 1990 deems hacking a crime, and to note the Rotterdam Rules, an electronic bill of lading does not fill this void in terms of accessing how both parties will share the risk, or as to which party will not incur damages. In the case of Glencore International v MSC Mediterranean, the electronic symbolic delivery is deemed fragile to hacking as the shipping company suffered loss from misdelivery caused by the hacking of their security codes that were frequently used.

It is highly true that the new electronic bills of lading try to solve many issues that paper bills of lading cannot, but they need to be introduced in a secure manner because their advantages do not quite balance with the risks. Hence, new systems like blockchains could help with the introduction and enforcement of proper national laws. A radical improvement of the Rotterdam Rules, to cover the risks associated with hacking and to reach global acceptance to attain enforcement, is another step that should eventually be taken.


International Instruments

The UNCITRAL Model Law on Electronic Transferable Records 2017

The Hague-Visby Rules 1968

The Rotterdam Rules 2008

UK Legislation

The Computer Misuse Act 1990

The Carriage of Goods by the Sea Act 1992


Brandt v Liverpool, Brazil and River Plate Steam Navigation Co Ltd CA 1924

Glencore international v MSC Mediterranean Shipping CO SA [2017] 2 Lloyd’s Rep 186

Lickbarrow v Mason (1794) 5TR 683

The Spalmatori [1964] AC 868


Professor Francis M B Reynolds and Sir Guenter Treitel, Carver on Bills of Lading (4th Edition Sweet & Maxwell 24th Mar.2017)

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