The technical side of electronic bills of
lading has been elaborated, the question remains whether e-bills are
recognized by UK, EU and international legislation. This aspect is split in
two facets, first, it is questionable that an electronic bill of lading and
the digital signature that is associated to it fulfil the legal form
requirements of UK law to conclude a contract. Secondly, is such a modern
e-bill in conformity with the several laws governing the trade with bills of
lading.
Under UK law, the general legal form
requirements to conclude an enforceable contract are that the contract ‘must
be made or evidenced in writing or in a document, and that it must be signed’.
According to the Interpretation Act 1978,
‘writing’ includes ‘typing, lithography, photography and other modes of
representing or reproducing words in a visible form (...)’.
Therefore, an electronic bill of lading must be visibly available to each
party.
It was argued, that digital information
that is sent via electronic means does not sufficiently satisfy this
requirement, as in the absence of a screen there is nothing left which is
visible.
Additionally, it was stressed that some physical memorial
is required in order to comply with the originally paper-based writing
prerequisite. However, both arguments cannot be satisfied. The latter point
that demands a physical memorial does not take into account that both parties
will usually store the document on an electronic medium or even print a
version on paper,
thus the physical memorial – may it be on paper or on a different medium – is
still fulfilled. And the former aspect neglects the fact that a ‘screen’ of a
computer is just as much a connecting link from document to visibility
as the camera to a photography or the remote station of a telephone facsimile
to the actual fax. All of these ‘written’ documents that are mentioned in the
definition of the Interpretation Act have some kind of intermediate stage that
ultimately produces the ‘written’ document.
At last, the Interpretation Act’s
definition also enshrines ‘other modes of representing or reproducing words in
a visible form’. Therefore, there is no argument that stands in contradiction
to an electronic bill of lading being a ‘written document’.
Moreover, the requirement of a ‘signature’
would also be fulfilled by an electronic bill of lading, although most
transactions by these means will not underlie the UK statutory signature
requirement.
The function of a signature is not only
very significant because it demonstrates that the signatory had an
authentication intention and that it evidences an intention to be legally
bound, but also that it originates from the purported sender.
As English case law already recognizes signatures that are typewritten,
printed,
made by means of a rubber stamp
or that are faxed
it is approved that the courts do not insist on handwritten signatures
anymore. Thus, the digital signature contained in an electronic bill of lading
should satisfy the signature requirement, too. The above described public key
encryption system offers a significantly high level of assurance that the
message was sent by the person in possession of the private key. This assures
the right origin of the message. By sending the encrypted document to the
certification authority, the sender demonstrates his intention to authenticate
the document to be his and also to be legally bound. At last, the
aforementioned ‘hash function’ secures that the whole electronic document has
not been altered en route, thus that it originates from the purported sender.
Hence, the e-bill also complies with the statutory signature requirements.
An electronic bill of lading which has an
encrypted digital signature must be regarded as a written and – where required
– a signed document subject to the form requirements of English Law.
It remains uncertain whether other UK
legislation covers the use of electronic bills of lading. Most noteworthy are
the provisions that are dealing explicitly with the trade of goods by sea,
such as the Carriage of Goods by Sea Act (COGSA) 1971 and the COGSA 1992. The
COGSA 1971 gives the ‘Hague Rules’, as amended by the Brussels Protocol 1968,
the force of law according to its sec. 1 (2). Therefore, the ‘Hague/Visby
Rules’ are part of the UK legislation.
The COGSA 1992 was issued to replace the
Bills of Lading Act 1855 with new provisions in respect to bills of lading and
certain other shipping documents. Although this statute was published as late
as 1992 when e-commerce and electronic communications were already highly
developed, the Act does not mention electronic bills of lading in particular.
Only two provisions within the Act refer to telecommunication systems and to
information technology, and one of them only contains definitions:
‘information technology’ includes any computer or other technology by means of
which information or other matter may be recorded or communicated without
being reduced to documentary form; and ‘telecommunication system’ has the same
meaning as in the Telecommunications Act 1984 (Sec. 5 (1) COGSA 1992).
Of more relevance is Sec. 1 (5) COGSA 1992, where it is provided that ‘The
Secretary of State may by regulations make provision for the application of
this Act to cases where a telecommunication system or any other information
technology is used for effecting transactions corresponding to: (a) the issue
of a document to which this Act applies; (b) the endorsement, delivery or
other transfer of such a document; or (c) the doing of anything else in
relation to such a document.’
In other words, the COGSA 1992 does not yet
apply to the named telecommunications systems or to other information
technologies, because such regulations have not been made at the present time
by the Secretary of State.
The fact that regulations, that would after all include electronic bills of
lading in the Act, have not been promulgated by the appropriate authority yet
is a peculiar result itself. However, the COGSA 1992 does recognize these
forms of telecommunication systems and other information technologies in
general. It is therefore a comparably simple and feasible task of regulatory
administration that needs to be fulfilled by the Secretary of State. A nation
that wants to boost e-commerce and claims that the UK legislation is leading
international trade, should not hesitate to provide for domestic laws,
ordinances and regulations that unquestionably do recognize electronic bills
of lading.
The COGSA 1971, on the other hand, does not
mention electronic bills of lading at all. However, as the COGSA 1971
incorporates the Hague/Visby Rules into English law, it remains doubtful
whether the electronic bill of lading shall be comprised by this convention.
Pursuant to Art. X of the Hague/Visby Rules the provisions ‘(...) shall apply
to every bill of lading relating to the carriage of goods between ports
in two different States (...)’. Moreover, it is defined in Art. I (b) of these
Rules that a ‘contract of carriage applies only to contracts of carriage
covered by a bill of lading or any similar document of title, in so far
as such document relates to the carriage of goods by sea, including any bill
of lading or any similar document as aforesaid issued under or pursuant to a
charter party from the moment at which such bill of lading or similar
document of title regulates the relations between a carrier and a holder of
the same’.
It would be audacious to assume that the
lawmakers of the Hague Rules in 1921 had in mind that an electronic document
could one day fall within this definition. However, following the conclusion
that was presumed at the end of chapter two, an electronic bill of lading that
was digitally signed by a certification authority acting as trusted third
party between two traders, could be regarded as a document of title, the
definition would fit: the electronic bill of lading is a document of title
that regulates the relations between a carrier and a shipper.
Some authors
do not go that far and rather take the view that the recognition of an
electronic bill of lading as a document of title can only be achieved through
longstanding mercantile custom, and hence that the Hague/Visby Rules do not
apply.
Concerning this point, it needs to be
emphasized that a statutory amendment of the Hague/Visby Rules allowing
the carrier to use equivalent electronic documentation instead, is not
planned.
Again, approval by mercantile custom does indeed take very long.
It must be concluded that UK legislation is
not in absolute conformity with the utilization of electronic bills of lading.
The COGSA 1992 as well as the Hague/Visby Rules both show a lack of
recognition to these new forms of documents.
The state of law concerning modern forms of
communication is much more precise within the European Union. The unique and
legal recognition of e-commerce and electronic signatures was first promoted
by the lawmakers of the EU. In order to harmonize the different legal systems
dealing with electronic signatures of EU Member States, the European
Parliament and the Council adopted the EU Directive on Electronic Signatures
(1999/93/EC).
As already stated in its recital 16, the
Directive 1999/93/EC ‘contributes to the use and legal recognition of
electronic signatures within the Community’. This principle is also laid down
in Art. 1 of the Directive saying that its purpose is to ‘facilitate the use
of electronic signatures and to contribute to their legal recognition’ and to
establish ‘a legal framework for electronic signatures and certain
certification-services in order to ensure the proper functioning of the
internal market’.
The most important provision of this
Directive is embodied in Art. 5 (1.a), where it is ruled that each Member
State shall ensure that advanced signatures
satisfy the legal requirements of a signature in relation to data in
electronic form in the same manner as a hand-written signature satisfies those
requirements in relation to paper-based data. In Art. 5 (1.b) it is
additionally emphasized that advanced electronic signatures are admissible as
evidence in legal proceedings.
Section 2 of Art. 5 of the Electronic
Signature Directive states that legal effectiveness of electronic signatures
and admissibility as evidence in court shall not be denied solely on the
grounds that such a signature is in electronic form.
With these provisions, the European
Parliament has paved the way for a legal recognition of electronic signatures
in the internal market. There is an automatic assumption that any electronic
signature that meets specific requirements, such as the issuing with a
qualified certification by a certification authority, is as legally valid as a
hand-written signature. Therefore, the advanced electronic signatures used in
encrypted bills of lading are deemed to be equivalent to traditional
hand-written signatures on paper.
The transposition date of this Electronic
Signatures Directive 1999/93/EC was, according to its Art. 13 (1), the 19th
July 2001. The question remains whether the UK have brought into force the
laws, regulations and administrative provisions to comply with this Directive.
The UK’s response to the European Signature
Directive was the Electronic Communications Act 2000 (ECA). This was published
in order to boost e-commerce in the UK and to make the UK the best environment
world-wide in which to trade electronically.
Basically, the ECA consists of three parts, firstly of provisions governing
the cryptographic service providers, secondly it deals with the facilitation
of e-commerce, and thirdly with miscellaneous and supplemental issues. The
most important provisions can be found in sec. 7 and sec. 8 ECA. The former
declares, in conformity with Art. 5 (1.b) of the Directive 1999/93/EC, that
electronic signatures and certificates that support them can be used as
evidence in court in the same way as hand-written signatures can be used.
However, the court can still determine if the electronic signature was used
correctly and if the document can be regarded as a reliable proof of the
contract. This competence of the court mirrors the assumption in paper
documents, that a hand-written signature ‘does not raise an irrefutable
presumption of validity’.
This means that a court has the liberty to decide at it’s own discretion
whether the electronic signature shall be deemed to be a proof of verification
of the holder’s identity.
The second significant provision is rooted
in sec. 8 ECA. This rule empowers ‘the appropriate Minister to modify, by
order, made by statutory instrument, the provisions of any enactment or
subordinate legislation’. By that, changes to the ECA or other legislation may
be made whenever it seems necessary in order to keep up with the latest
technological and legal developments, and, especially, to remove restrictions
from individual pieces of legislation that prevent the use of electronic
communication.
So far, however, such an order of the Minister to repeal legislation in
question has not been proposed.
As the first part of the ECA 2000, which
concerns the regulation of the providers of cryptographic support services, is
in conformity with certain provisions of the EU Signature Directive that deal
with certification-service-providers (e.g. Art. 1, Art. 2 (11), Art. 6
Directive 1999/93/EC), the UK government claims that its legislation is in
conformity with the named Directive.
The transposition of EU Directives into
national law is each Member State’s own business, as long as they do implement
the provisions at all and as long as they meet the transposition date. In this
case, the UK government has published the ECA 2000 on the 19th
November 1999 and it became law in summer 2000 – therefore, the implementation
date of the Directive by July 2001 has been observed. However, it has been
criticised that the first part of the ECA 2000 is irrelevant, as there is no
need for a formal regulation mechanism for the cryptography service providers
because there is no demand for it and because market forces are likely to
suffice.
Considering this, it must be emphasized that there is indeed a need for a
formal regulation of the cryptography service providers. As the certification
authorities
act as independent but state controlled ‘notary publics’, it is absolutely
necessary to control them by legislative means. Only in this way there can be
sufficiently trust in the encryption of digital signatures, in order to regard
electronic bills of lading as negotiable documents of title.
Hence, the UK government has brought into
force the Electronic Communications Act 2000, which complies with the EU
Directive 1999/93/EC on Digital Signatures.
Once the EU recognized the legal validity
of digital signatures, it continued with its harmonization of the Member
State’s different jurisdictions on electronic commerce. On the 8th
of June 2000 the Parliament and the Council published the Directive 2000/31/EC
on certain legal aspects of information society services, in particular
electronic commerce, in the internal market.
The Directive’s most striking provision is
contained in Art. 9 (1) 2000/31/EC. It reads that ‘Member States shall ensure
that their legal system allows contracts to be concluded by electronic means.
... [and] shall in particular ensure that the legal requirements applicable to
the contractual process neither create obstacles for the use of electronic
contracts nor result in such contracts being deprived of legal effectiveness
and validity on account of their having been made by electronic means’.
This regulation underscores and develops
further the approach that was already achieved with the Directive 1999/93/EC.
Art. 9 (1) Directive 2000/31/EC is not limited to the legal recognition of
digital signatures, but gives legal effectiveness to the entire contract that
is concluded by electronic means.
The European Union with the named
Directives and the UK with the Electronic Communication Act 2000 have
abolished all possible hindrances that could have prevented a contract to be
legally enforceable that is concluded by any kind of electronic means.
Therefore, on EU-level the use of electronic bills of lading will not create
an obstacle to the trade of goods carried by sea.
There are several other international trade
regulations that need to be considered, apart from the UK laws and the EU
Directives, in order to estimate the legal validity of electronic bills of
lading.
The first statute that acknowledged the
modern form of e-bills was agreed upon by the International Maritime Committee
(CMI) in 1990. The CMI ‘Rules for Electronic Bills of Lading’ (CMI Rules) are
a set of voluntary provisions that can be incorporated into a sales contract
whenever the parties so agree. Art. 3 a) CMI Rules states that the ‘Uniform
Rules of Conduct for Interchange of Trade Data by Teletransmission’ (UNCID)
1987 shall govern the conduct between the parties, and Art. 3 b) CMI Rules
declares that the electronic data interchange within the framework of the CMI
Rules should conform with the relevant standards laid down in the ‘UN Rules
for Electronic Data Interchange for Administration, Commerce and Transport’
(UN/EDIFACT).
By that, the use of electronic bills of lading under the CMI Rules is
automatically in conformity with the important international regulations on
trade data and EDI.
Furthermore, the CMI Rules provide in Art.
7 for successive transfers while the goods are at sea, for the distribution of
private keys to the carrier and the holder in Art. 8, and they acknowledge
that electronic data is equivalent to writing in Art. 11 CMI Rules. Therefore,
it can be said that the CMI Rules not only allow the utilization of e-bills,
even more, they established the electronic bill of lading in today’s form.
However, the CMI has also recognized the
rapid developments in the electronic world and considers an update of the 1990
CMI Rules. It therefore established the ‘E-Commerce Working Group’ because
there ‘is a need to clarify certain functional issues such as the right of
control and the transfer of rights in the context of an electronic
transaction’.
In the long term, the CMI wants to create a new international convention, that
covers all aspects of maritime transport law. There is already a first draft
of the working group that was submitted to the secretariat in December 2001, a
second draft was supposed to be available during the course of summer 2003.
The major goal of CMI is to facilitate the
needs of electronic commerce with an instrument that is compatible with
e-commerce and that is medium neutral as well as technology neutral. This
instrument shall take into account that technology evolves rapidly and that it
must be therefore adapted to all types of systems, such as operating systems
in a closed environment like the intranet, and in an open system like the
internet.
Another concern is to avoid the discussions
around the term ‘document’, which still conveys the widespread feeling that it
has to do with ‘paper’. Accordingly, CMI created the expression ‘contract
particulars’ that ‘was found to be a suitable expression that can easily apply
to particulars recorded in a transport document or in an electronic record’.
Furthermore, the working group’s
proposition that negotiability can be achieved and effected by electronic
means is supported by several draft provisions, among them sec. 1.13 that
defines the ‘Negotiable electronic record’. Also, sec. 2 deals entirely with
electronic communication and declares in sec. 2.1: ‘Anything that is to be in
or on a transport document in pursuance of this Instrument may be recorded or
communicated by using electronic communication instead of by means of the
transport document (...)’. This paragraph was formed to lay down the general
principle of equivalence between electronic and paper communication.
At last, there is a provision that is
deemed to be the counterpart of the Hague Rules and the Hamburg Rules, which
require the carrier to issue a negotiable bill of lading on demand after
receiving the goods.
The draft rule in sec. 8.1 indicates that ‘(...) the shipper is entitled to
obtain from the carrier a negotiable electronic record (...)’.
This CMI Draft Instrument on Transport Law
strongly supports e-commerce in general by any means. It would therefore also
recognize an electronic bill of lading as an acceptable substitute for the
traditional paper bill.
However, one must await what the 38th
CMI Conference in Vancouver, Canada from 31st May to 4th
June 2004 will enact of this draft – or if anything at all will be adopted at
that stage.
The United Nations Commission on
International Trade Law (UNCITRAL) also proclaimed an international regulation
for electronic commerce – the so-called UNCITRAL Model Law on Electronic
Commerce.
This in December 1996 published Model Law ‘is not directly applicable,
but is designed to operate as a framework for national laws on the legal
aspects of electronic data interchange’.
It is thus - in comparison to the CMI Rules - not a set of rules that can be
incorporated into a contract, but a scaffold to help States form their own
national law.
The Model Law overcomes the problems
connected to the paper-based requirements such as ‘writing’ and ‘signature’
with the principle of ‘functional equivalence’:
it analyses their purposes and functions and considers ‘the criteria necessary
to enable electronic data to achieve the same level of recognition as the
corresponding paper document’.
Thus, Art. 17 of the Model Law declares that where a law requires various
actions be carried out in writing or by using a paper document, that
requirement is met if the action is carried out by using one or more data
messages.
Therefore, under the UNCITRAL Model Law, it
would undoubtedly be possible to replace a traditional paper-based bill of
lading with an electronic version by using several data messages.
The International Chamber of Commerce (ICC)
is the creator of two more international trade regulations, that both give
some indication as to the use of electronic shipping documents. One is the
so-called INCOTERMS 1990, which was replaced by INCOTERMS 2000 on 1st
January of that year.
It is a set of standard term contracts of sale, that particularly provides for
the documentary requirements. Point A8 of INCOTERMS 2000 rules that an
‘equivalent electronic data interchange (EDI) message’ can replace a transport
document like an order bill of lading, where the seller and the buyer have
agreed to communicate electronically.
Insofar, the INCOTERM - provisions regard
an electronic message as a suitable substitute for a traditional order bill of
lading, but they still need to be implied into the contract by both parties.
Furthermore, the ICC issued the ‘Uniform
Customs and Practice for Documentary Credits 1993 (UCP 500), that can be
applied where a bank gives documentary credit in a sales contract. Art. 20 of
the UCP 500 states that an ‘original document’ is acknowledged if it has been
produced by a computer and an ‘electronic method of authentication’ of that
document.
Thus, the International Chamber of Commerce
issued both the INCOTERMS 2000 and the UCP 500 with provisions that
contemplate an electronic data message as a possible equivalent to a
traditional bill of lading. With the latest developments regarding security
and on the other hand the need for electronic data transfer there should be no
doubts that the electronic bill of lading can satisfy the requirements imposed
by the ICC.
In comparison to the UK legislation, one
can see that all of the international trade regulations
are in conformity with the general use of electronic bills of lading. Most of
these trade guidelines need to be agreed upon by the parties involved, or they
are simply deemed to be a framework for the individual trade laws of the
different countries. However, the wide spread application of provisions that
recognize modern forms of e-bills are an irrefutable indication that
international trade with goods carried by sea cannot be without these future
electronic bills of lading.
© 2003
Carsten
Schaal &
Lex e-Scripta,
INTER-LAWYER.com. All Rights Reserved.
