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The 21st Birthday of the Electronic Bill of Lading: With Age Comes Maturity
© 2003 Carsten Schaal & Lex e-Scripta, INTER-LAWYER.com.  All Rights Reserved.


Chapter 3: Legal Issues and Form Requirements

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.

3.1. Form Requirements of UK Law

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’.[1]

According to the Interpretation Act 1978, ‘writing’ includes ‘typing, lithography, photography and other modes of representing or reproducing words in a visible form (...)’.[2] 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.[3] Additionally, it was stressed that some physical memorial[4] 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[5], 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.[6] As English case law already recognizes signatures that are typewritten[7], printed[8], made by means of a rubber stamp[9] or that are faxed[10] 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.

3.2. Other UK Legislation

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.[11]

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).[12] 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.[13] 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’.[14]

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[15] 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.[16] 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.

3.3. EU Directives and UK Implementation

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).[17]

3.3.1. Electronic Signatures Directive (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[18] 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.[19]

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.[20]

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.

3.3.2. Electronic Communications Act 2000

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.[21] 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.[22] 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’.[23] 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.[24] So far, however, such an order of the Minister to repeal legislation in question has not been proposed.[25]

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.[26]

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.[27] 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[28] 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.

3.3.3. Electronic Commerce Directive (2000/31/EC)

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.

3.4. Other International Trade Regulations

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.

3.4.1. CMI Rules 1990

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).[29] 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.

3.4.2. CMI Draft Instrument on Transport Law

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’.[30] 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.[31]

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.[32]

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’.[33]

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.[34]

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.[35] 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.

3.4.3. UNCITRAL Model Law

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.[36] 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’.[37] 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’[38]: 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’.[39] 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.[40]

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.[41] 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.

3.4.5. UCP 500

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.[42]

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[43] 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.

[1] Beale/Griffiths, Formal requirements in e-commerce, note 6 above, p. 470; Reed/Angel, Computer Law, note 1 above, p. 314; UK Law Commission, Advice on Electronic Commerce, note 8 above, p. 7.

[2] Interpretation Act 1978, sec. 5, Sched. 1 (italics added by the author). Compare Morrison, Formal requirements in digital signatures, note 49 above, p. 29; Morrison, Digital Signatures, note 64 above, p. 24.

[3] Compare Beale/Griffiths, Formal requirements in e-commerce, note 6 above, p. 471.

[4] ibid., p. 472.

[5] ibid., p. 472; UK Law Commission, Advice on Electronic Commerce, note 8 above, p. 11.

[6] Beale/Griffiths, Formal requirements in e-commerce, note 6 above, p. 473; Reed/Angel, Computer Law, note 1 above, p. 315.

[7] Newborne v. Sensolid Ltd. [1954] 1 Q.B. 45.

[8] Compare Beale/Griffiths, Formal requirements in e-commerce, note 6 above, p. 473.

[9] Goodman v. J. Eban Ltd. [1954] 1 Q.B. 550; Chapman v. Smethurst [1909] 1 K.B. 927.

[10] Re A Debtor (No. 2021 of 1995) [1996] 2 All E.R. 345, 351.

[11] Hague Rules of 1921 (signed in Brussels on August 25th, 1924); Brussels Protocol of 1968 known as Visby Rules.

[12] See Appendix 3 in Wilson, Carriage of Goods by Sea, note 9 above, p. 363, 365.

[13] Clarke, Transport documents, note 5 above, p. 360; Yates, Carriage Contracts, note 5 above, 1-313.

[14] Emphasis added by the author.

[15] Nicoll, C.C., “BOLERO Makes the Bill of Lading Obsolete”, 6 (7) International Maritime Law 1999 (hereinafter “Nicoll, Bolero Makes Bill of Lading Obsolete”), p. 148; Todd, Banker’s Documentary Credits, note 2 above, p. 168.

[16] Compare Clarke, Malcolm, “A black letter lawyer looks at Bolero”, (2) International Trade Law Quarterly 1999 (hereinafter “Clarke, Black letter lawyer looks at Bolero”), p. 70; Faber, E-Bills, note 41 above, p. 239.

[18] As described above, see p. 14 note 68.

[19] Compare Morrison, Formal requirements in digital signatures, note 49 above, p. 31; Morrison, Digital Signatures, note 64 above, p. 27; Sinisi, Digital Signature Legislation, note 64 above, p. 18.

[20] Sinisi, Digital Signature Legislation, note 64 above, p. 18.

[21] Bond, Robert T.J., „Electronic Communications Act 2000“, (9) Shipping & Trade Law 2000 (hereinafter “Bond, ECA 2000”), p. 3.

[22] Bond, ECA 2000, note 96 above, p. 4; Morrison, Digital Signatures, note 64 above, p. 28.

[23] Bond, ECA 2000, note 96 above, p. 4.

[24] Beale/Griffiths, Formal requirements in e-commerce, note 6 above, p. 475, 476; Morrison, Digital Signatures, note 64 above, p. 28; Reed/Angel, Computer Law, note 1 above, p. 320.

[26] Bond, ECA 2000, note 96 above, p. 5.

[27] See at Morrison, Formal requirements in digital signatures, note 49 above, p. 32; Morrison, Digital Signatures, note 64 above, p. 29.

[28] See above p. 13 note 64.

[29] Compare Yates, Carriage Contracts, note 5 above, 1-310; see further Ramberg, Jan, Incoterms in the Era of Electronic Data Interchange, Forum internationale, No. 13, Kluwer Law and Taxation Publishers: Deventer 1988 (hereinafter “Ramberg, Incoterms and EDI”), p. 10.

[33] ibid., p. 534.

[34] ibid., p. 541.

[35] Art. III (3) Hague Rules as amended by the Brussels Protocol 1968; Art. 14 (1) Hamburg Rules 1978.

[36] Clift, Jenny, “Electronic Commerce: the UNCITRAL Model Law and Electronic Equivalents to Traditional Bills of Lading“, 27 (7) International Business Lawyer 1999 (hereinafter “Clift, UNCITRAL Model Law”), p. 311.

[37] Yates, Carriage Contracts, note 5 above, 1-311.

[38] ibid.; Clift, UNCITRAL Model Law, note 111 above, p. 312.

[39] Clift, UNCITRAL Model Law, note 111 above, p. 312.

[40] Yates, Carriage Contracts, note 5 above, 1-310.

[41] Debattista, Charles, „Incoterms 2000“, 14 (6) P&I International 2000, p. 135; for the history of Incoterms see Ramberg, Incoterms and EDI, note 104 above, 8-10.

[42] Faber, E-Bills, note 41 above, p. 241.

[43] The Hamburg Rules are also an international convention by the UN, signed in 1978 in Hamburg which came into force on November 1st, 1992. Unfortunately, the Rules have not received widespread recognition. Despite of that, Art. 14 (3) of the Hamburg Rules anticipates the electronic signing of a bill of lading, why it is arguable that they cover electronic bills of lading, too.

© 2003 Carsten Schaal & Lex e-Scripta, INTER-LAWYER.com.  All Rights Reserved.

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