The Electronic Trade Documents Act came into force last week in the UK, potentially transforming electronic bills of lading. English law previously didn’t recognize e-Bills, impacting maritime contracts.
Coverage For Electronic Bills
All of this has now changed, and provided the bill is part of a “reliable system” the law will make no distinction between paper and e-Bills.
Where Members use electronic bills of lading there is no impact on cover for the usual cargo risks. For instance, if a cargo carried under an e-Bill is damaged or lost, cover would respond in the usual way. However, if a claim is made for a loss that could only have arisen under an electronic bill, then under what used to be known as the Paperless Trading Endorsement (now incorporated into the UK Club rules at 5W), there is no cover unless the system under which the electronic bill has been issued is one that has been approved by the International Group of P&I Clubs (IGP&I). Currently there are 10 electronic bills of lading systems by the Group.
Electronic Bill Of Lading Validity
A Bill of Lading performs three functions – it is a receipt for the goods, it is evidence of the contract of carriage, and most crucially, it gives the holder of the bill the right to possession of the goods. If an electronic bill did not replicate any of these functions, claims could arise. The Clubs have historically been particularly concerned at the risk of misdelivery claims in the event of a court concluding that a person who presented an electronic bill did not have the right to possession of the goods carried.
When reviewing systems, the Group has not reviewed the technical characteristics of the system, but rather the legal aspects. Where the law does not recognise electronic bills, an electronic trading system requires the participants to agree how bills issued under the system perform the equivalent function of a paper bill. This has often required complex legal arrangements, whose effectiveness needs to be analysed.
E-Bills And Legal Changes AheadO
The Act could change all that, and the simple acknowledgement of equivalence under English law between e-Bills and paper bills could render much of the legal frameworks referred to above obsolete. However there are still uncertainties. As noted above, the Act recognises e-Bills, provided the bill is part of a reliable system. Various criteria are recorded as constituting a reliable system. But no specific system is prescribed, and it is likely that some sort of international standard or “kite mark” mechanism will be necessary to establish whether a particular trading platform meets the criteria.
So for the moment the cover position remains the same and systems will still need to be approved. But it’s a case of watch this space. The UK P&I Club supports the use of e-Bills and is a proud supporter of the BIMCO 25 x 25 Pledge eBills of Lading (bimco.org) . The advantages, both in terms of costs and efficiency, significantly outweigh any disadvantage of e-Bills, and the Club looks forward to further clarity on the question of reliable systems.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source- UKP&I
