Law Commission Considers Introducing Electronic Bills Of Lading

What Is a Bill Of Lading?

Essentially, a Bill of Lading keeps track of vended goods that have been loaded onto a vessel. It is a contract executed between a company that transports goods and a shipper of goods. The company transporting the goods provides the Bill of Lading to the shipper. The word ‘bill’ is defined as a document showing the price paid in either written or printed form to deliver the respective goods or services. Interestingly, the definition for ‘lade’ is the action of loading items of freight onto a vessel such as a ship.

What’s The Use?

A Bill of Lading is a useful piece of documentation in three respects,:

• shows the Terms and conditions governing a transaction
• represents Evidence of Title in the good and acts as security for borrowing
• is a receipt confirming that the goods have been loaded in the required condition and according to the terms and conditions

However, although Bills of Lading are capable of constituting evidence of title in the respective goods it depends on the jurisdiction as to whether a Bill is accepted. Adam Richardson from Holman, Fenwick Willan Solicitors commented that whilst these documents can be accepted as evidence of title many jurisdictions refuse to accept them.

So What Changes Are Likely For Bills Of Lading?

As presently enacted, the law of England and Wales does not permit electronic Bills of Lading to be used in transactions involving international trade. This is primarily because the law does not allow the ‘possession’ of such documents. The law places important emphasis upon the action of having ‘possession’ and ‘holding’ the position of the relevant document. The way the system operates can trace its origins to centuries of trade during which the methods adopted have continued to be used. Now the Law Commission has recommended the most significant changes to the law of international trade by proposing the introduction of electronic Bills of Lading and allowing them to capable of being ‘possessed’.

What Are The Advantages Of Electronic Bills Of Lading?

There are three advantages to the use of electronic Bills of Lading:

• documents can be tracked easily. They open the possibility of using measures such as e-signatures, audit trails, and other security features
• if correctly adopted e-Bills can mitigate the risk of fraud
• parties involved in these transactions can introduce Bills of Lading as a Cost-Cutting exercise, including reductions in courier, paper, and related costs.
• E-Bills OF Lading can arguably make the process more efficient, faster, and easier to send documents and amend details.

However, by way of balance the prospective adoption of Electronic Bills of Lading is not without its disadvantages:

• there is a very real potential for opportunists to commit fraud by attacking vulnerabilities in the respective system and
• the new working methods may take some time to introduce as it will be necessary to obtain the full authority from key players.

What Should Lawyers Be Advising Their Clients?

Considering the proposed reforms to Bills of Lading, lawyers should be advising clients that the days of only being able to use paper Bills of Lading appear to be coming to an end. Such documents will be capable of possession. However, parties contemplating such changes should implement a security risk assessment to ensure

• their systems can withstand cyber-incidents
• measures are implemented to reduce the risk of fraud
• key players are communicating collaboratively to agree to the new changes to reduce the risk of delay

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES

[1] Law Commission - Electronic Trade documents - Electronic trade documents | Law Commission – May 2022

[2] Recommendations to allow electronic documents would revolutionise trade – Recommendations to allow electronic documents would revolutionise trade | Law Commission 16th March 2022 -

[3] Richardson, Adam et. al – Holman Fenwick Willian LLP – Electronic Bills of Lading – Is This Time Different? - HFW | Electronic Bills of lading - is this time different...

[4] Kantharia, Raunek – Bills of Lading in Shipping: Importance, Purposes, and Types – Maritime Insight – 21 December 2021 - Bill Of Lading in Shipping: Importance, Purpose, And Types (marineinsight.com)

[5] English Carriage of Goods by Sea Act 1992 (COGSA)

[6] UNCITRAL Model Law on Electronic Transferable Records (2017) - UNCITRAL Model Law on Electronic Transferable Records (2017) | United Nations Commission On International Trade Law – 13 July 2017

[7] Grandage, N et al. – Law Commission proposal on electronic trade documents – NortonRoseFulbright - 03 May 2022 Law Commission proposal on electronic trade documents: a significant demonstration of their approach to new technology and a new era for trade finance | Global law firm | Norton Rose Fulbright