This book is an attempt to discuss as comprehensively as possible the progress that has been made in recent years, in both legal and practical terms, towards the goal of achieving paperless trade in the international sale of goods carried by sea. It examines emerging practices in this field and how they have been, or are being, dealt with legally. It builds upon a considerable body of legal writing on this subject that spans a number of decades. Indeed, the legal implications of the transition to paperless international trade are a topic that has been much discussed and debated, and this book represents this author’s modest contribution to this debate.
The major obstacles that commentators have viewed as likely to slow down the emergence of electronic alternatives to trade documents—in particular, documents of title such as the bill of lading—are: lack of confidence1 (and a consequent lack of customer demand);2 uncertainties regarding risk and liability;3 the absence of a single universally used standard for electronic communications;4 the absence of the necessary technological infrastructure in developing countries;5 and governmental (p. 2) requirements at points of exit and entry into different jurisdictions.6 An overarching problem is the number and variety of participants that are typically involved in an international trade transaction, and which would therefore potentially need to ‘handle’ the electronic alternatives. These include buyers and sellers (located in different jurisdictions), carriers, freight forwarders and other intermediaries,7 banks,8 and government authorities. Additionally, the use of electronic systems of communication, such as the Internet, requires the involvement of yet more participants, including network service providers (to provide the communications infrastructure) and certification authorities (to secure and authenticate communications).9
From the legal point of view, earlier contributions to the debate are concerned with the difficulties (relative to the satisfaction of form and evidentiary requirements) to which expressions such as ‘original’, ‘document’, ‘writing’, and ‘signature’ may give rise when they appear in the law.10 Many of these issues have since been addressed in many jurisdictions, including the UK, which introduced legislation such as the Civil Evidence Act 1995 and the Electronic Communications Act 2000, and where the courts have taken decisions such as J Pereira Fernandes v Mehta.11 The most important legal obstacle, which has been much discussed by commentators, is the difficulty of having a paperless document of title that would be recognized as such for the purposes of current law.12 In many jurisdictions, this obstacle has never been completely removed.
(p. 3) A discussion of the progress that has been made in removing both legal and practical obstacles is the principal aim of this book. While the discussion focuses mainly on international standards and the English legal system, it also contains some reference to the domestic laws of other jurisdictions—most notably, the United States and the European Union, but also Australia, Canada, China, Japan, and South Korea. Some of these have gone further than the UK in achieving legal recognition of electronic alternatives to documents used in maritime trade.
Use of electronic alternatives to date has not been perceived as widespread. It has been expanding in recent years, however, especially in certain trade sectors, and there is every sign that it will continue to do so. The book examines emerging trends and tests their ability to achieve the legal functions performed by the paper documents that they are designed to replace. The hope is that the book will be a useful single reference point on the subject for academics and practitioners alike.
I have attempted to take a holistic approach, with an in-depth discussion of a wide range of documents—in particular, the ‘holy trinity’ of cost, insurance, and freight (CIF) transactions: the invoice; the transport document (bills of lading, sea waybill, and delivery orders are all discussed); and the cargo insurance document (which was formerly a policy, but now tends to be a certificate of insurance). The book also discusses current developments relevant to maritime trade, such as the setting up of electronic customs and import/export facilities in a number of jurisdictions, and explores their significance and potential impact. Payment arrangements and payment methods are also analysed, but an in-depth examination of credit instruments such as the bill of exchange would have been tangential to the main theme of the book. These instruments are therefore discussed only in so far as they are relevant to payment arrangements that are widely used in international maritime trade.
In 1995, Yiannopoulos observed:
The use of electronic bills of lading is, essentially, a business rather than a legal decision. The law may provide the legal framework for the function of electronic bills of lading in the same way and with the same effects as the traditional bills of lading. However, business interests will eventually determine whether the availability of, and the economic incentives for, the use of electronic bills of lading outweigh concerns for privacy and the safeguarding of trade secrets, for accuracy of information, and for security of transactions and acquisition. Such concerns call for technological rather than legal solutions.13
This observation may be said to apply not only to bills of lading, but also to all of the paper documents used in maritime trade.
(p. 4) In this context, the role of the law is to avoid standing in the way of progress, as well as to regulate it as necessary when progress occurs. Thus the law needs, first of all, to indicate to those designing and setting up electronic solutions what requirements those solutions need to satisfy if their functional equivalence to paper documents is to be recognized at law. In establishing these requirements, it should be ensured that, while the necessary level of certainty is attained, the potential for diversity, innovation, and development is not restricted. Thus the law needs to make clear the requirements to be satisfied while facilitating progress, allowing for technological innovation, and avoiding, so far as possible, the danger of obsolescence.
Secondly, the law should aim to increase confidence in the ability of electronic alternatives, subject to the fulfilment of certain requirements, to achieve the desired effects at law, thus encouraging adoption by potential users and increasing demand.
Finally, legal development should, as far as possible, take place in a harmonized manner in different jurisdictions, so as to reduce the legal complexities and potential conflicts of law issues that may presently be reducing the attractiveness of electronic documents. This book attempts to reveal the extent to which the law is performing this role.
1 GF Chandler, ‘Maritime Electronic Commerce for the Twenty-First Century’ (1998) 22 Tulane Maritime Law Journal 463; M Clarke, ‘Transport Documents: Their Transferability as Documents of Title; Electronic Documents’  Lloyd’s Maritime and Commercial Law Quarterly 356; RP Merges and GH Reynolds, ‘Toward a Computerized System for Negotiating Ocean Bills of Lading’ (1986) 6 Journal of Law and Commerce 23.
3 F Gehrke, New Attempts at Electronic Documentation in Transport: Bolero—The End of the Experiment, the Beginning of the Future? (LLM dissertation, University of Cape Town 2001), available online at 〈http://web.uct.ac.za/depts/shiplaw/theses/gehrke.pdf〉 [accessed 6 March 2013]; C Nicoll ‘Insurance of E-Commerce Risks’ (1999) 4 International Journal of Insurance Law 293.
4 JCT Chuah, ‘The Bolero Project: The International Chamber of Commerce’s Electronic Bill of Lading Project’ (2000) 30 Student Law Review 56; Gauthier (n 2); P Mallon, ‘The Legal Implications of Electronic Commerce in International Trade’ (1997) 8 (Oct/Nov) Computers and Law 24; WH van Boom, ‘Certain Legal Aspects of Electronic Bills of Lading’  European Transport Law 9.
5 A Delmedico, ‘EDI Bills of Lading: Beyond Negotiability’ (2003) 1 Hertfordshire Law Journal 95, available online at 〈http://www.bileta.ac.uk/〉 [accessed 6 March 2013].
6 D Faber, ‘Electronic Bills of Lading’  Lloyds Maritime and Commercial Law Quarterly, 232; Mallon (n 4); LE Leibowitz, TM Polino, and MA Frank, ‘[World Trade Organization] Negotiations on Trade Facilitation: Prospects for Cutting Red Tape at the Borders and Opening Doors for Developing Countries’ (2007) 13 International Trade Law and Regulation 4.
7 B Kozolchyk, ‘The Evolution and Present State of the Ocean Bill of Lading from a Banking Law Perspective’ (1992) 23 Journal of Maritime Law and Commerce 161, discusses the various intermediaries that may be involved in the issue of bills of lading, eg freight forwarders, ship agents, and ‘non-vessel operating common carriers’ (NVOCCs).
8 Commentators raise issues such as the acceptability of electronic alternatives to banks (HM Kindred, ‘When Bits Replace Bills, What Shall the Law Byte on? Legal Consequences of Automating Carriage Documentation’, in DJ Sharpe and WW Spicer (eds) New Directions in Maritime Law (Carswell, Toronto 1984), 207; Faber, n 6) and the continued relevance of bills of lading to banks as security (C Debattista, ‘Banks and the Carriage of Goods by Sea: Secure Transport Documents and the UCP 500’ (1994) 9 Butterworths Journal of International Banking and Financial Law 329; Kozolchyk, n 7; B Kozolchyk, ‘The Paperless Letter of Credit and Related Documents of Title’  55(3) Law and Contemporary Problems 39.
9 C Nicoll, ‘Electronic Commerce: A New Zealand Perspective’ (1999) 6 Electronic Data Interchange Law Review 5; JB Ritter, ‘Defining International Electronic Commerce’ (1992) 13 Northwestern Journal of International Law and Business 3.
10 Faber (n 6); RB Kelly, ‘The CMI Charts a Course on the Sea of Electronic Data Interchange: Rules for Electronic Bills of Lading’ [1991–92] Tulane Maritime Law Journal 349; Kindred (n 8); Kozolchyk (n 7); J Livermore and K Euarjai, ‘Electronic Bills of Lading and Functional Equivalence’ (1998) 2 Journal of Information, Law and Technology, available online at http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/1998_2/livermore/ [accessed 31 March 2013]; C Nicoll, ‘Should Computers Be Trusted? Hearsay and Authentication with Special Reference to Electronic Commerce’  Journal of Business Law 332; C Pejovic, ‘Main Legal Issues in the Implementation of EDI to Bills of Lading’  European Transport Law 163.