The Global fast pace transition to digital trade : are cyber laws keeping up with the pace?

Updated: Jul 22, 2020

An insight on Carriage of Goods by the sea : electronic bills of lading

As current times keep changing, Carriage of Goods by the sea is deemed to face many new changes in many areas of operations. International trade transactions are vastly by 90% dependent on the marine time industry.

Hence in Carriage of goods by the Sea it is very essential to note the instrument herein known as ' Bill of Lading' this is a document issued by the Carrier to the shipper acknowledging the receipt of the goods for the shipment which will later be used by the cargo owner to receive the goods.

The bill of lading has Three main functions:

- Acts as a receipt of the Goods

- Stands as a document of title

-Evidence of contract of Carriage

The bill of Lading acting as an essential instrument in carriage of goods by the sea, is a document of title that can be endorsed, as entailed in the position of the English common law Act Section 1 (2) (a) of The Carriage of Goods Act of 1992.

Hence normal paper bills of lading as per the current era in trying to meet the advanced development of the marine industry where in term states like, Greece, Japan, USA and including the United Kingdom, are ranking high in number of ship owing states. That being set aside the paper bills of lading are now facing a great challenge as now many ships arrive early, a vast difference from the 20th century.

The late arrival of the paper bill of lading either in a CIF or FOB contract is caused by the paper bill of lading being dependent on being couriered to the cargo owner, which results in the cargo owner incurring more costs as far as demurrage charges will be on fault which in result for the cargo owner to mitigate this challenge and receive cargo from the carrier is of the option of seeking a letter of indemnity.

In mitigating the current challenges of a paper based bill of lading, by mid-20th century grew the development of the E-Bill of lading. That was a solution minimising the costs which the paper bill of lading produced as it aimed at meeting the needs of the shipping industry by being faster, cheaper by not being dependent on courier service and less fragile to fraud as the paper bill of lading could be lost on transit before reaching the cargo owner. Hence the electronic bills of lading by operation through current trusted systems that have been operating successfully in the application of the electronic bills of lading are thus far Bolero, essDOCS and E-title as highly recommended by the P&I clubs.

It is deemed essential that it be noted that the electronic bills of lading are not quite thus far the best alternative as being more fragile to Cyber attacks of hacking. The common law Computer Misuse Act of 1990 deems hacking as an offence, still cyber attacks have been a great delay of the electronic bill of lading becoming the best alternative to the regular paper based bill of lading.

In a short view of the case of MSC Mediterranean Shipping Company S.A. -v- Glencore International AG [2017] EWCA Civ 365 which concerned an electronic symbolic delivery, it was demonstrated that E-bills of lading are quite far in meeting the ideal functions of a paper bill of lading or as a document of title. This case exposed how fragile the electronic symbolic delivery is as the systems which were operational for frequent transactions between the carrier and the cargo owner ended due to a hacking incident.

How far are Cyber laws in place to aid the advancement of the electronic bills of lading?

Carriage of goods by the sea is governed by laws like the Hague rules, Hamburg rules and the Hague-Visby rules being, thus far adopted by many states. However, these are not addressing the direct issue of electronic bills of lading, though the Hamburg rules tried to shed a light to electronic bills of lading. In meeting that void, the United Nations Commission on International Trade Law (UNCITRAL) 2008 adopted the Rotterdam rules, which gained signatories in 2009 but is not yet in force as ship owing states states like China, USA and the UK have not ratified it, while Spain was the fast lead in ratification. It is herein quite essential to note that the Rotterdam rules not being in force is not the only issue. The rules are quite silent on the issue of hacking and the liability of the shipper and carrier if are faced by such situations.

In absentia of a global legal legislation to properly introduce the electronic bills of lading thus far made the electronic bills of lading, to be seen by many jurisdictions as a risky alternative for carriers and shippers as it denies the parties using them to have a proper cargo claim litigation stand in attaining rights, in terms of any breach as it is seen by many global jurisdictions not to have the same functions as a normal paper bill of lading, because it does not have the same stand as a document of title.

The position in the English common law as per Section 1 (5) of carriage of goods by the sea act of 1992 clearly tries to aid the adoption of Electronic bills of lading by vesting the powers to the Secretary of State to extend the Act, by regulations, to paperless transactions but in general no such regulations are in force. It is safe to declare that by the position in the English common law as Section 1 (2) (a) which requires a bill of lading be transferred by indorsement, makes it quite a huge challenge for current electronic bills of lading systems like Bolero to meet this requirement which makes a paper bill of lading stand as a document of title.

The lack of a global legislation accepting the use of Electronic bills of lading has made it a further delay in adopting more stricter measures to minimise the threat of cyber crimes like hacking in the global shipping industry. The UNCITRAL Model Law on Electronic Transferable Records as adopted in 2017 are to assist the adoption of the use of electronic bills of lading but does not have a binding force which is not by high speed meeting the global use and adoption in terms of laws and policies which support electronic bills of lading which herein could aid the mitigation of cyber crimes like hacking in the shipping industry.

Essential advanced solutions:

In meeting the void a quick solution like block-chain could be essential if the systems that aid the use of E-bills of lading submit to the system as it is noted to be very secure and quite extremely difficult to disrupt and hack transactions in the system which through the success achieved could perhaps convince many jurisdictions to adopt laws that support the global use of Electronic bills of Lading.

The adoption of the use of electronic bills of lading in the shipping industry can lead to more strict laws that protect the users of electronic bills of lading from cyber crimes like hacking which are a great threat in paving the actual support in adoption of the E-bills of lading. The electronic bills of lading which come to reduce many costs that the paper based bill of lading admits it is deemed essential the fast pace that the digital trade is advancing does not leave bills of lading aside as it is an essential instrument in carriage of goods by the sea and the global international trade.

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