Electronic Trade Documents Act - What Does This Mean for E-Bills?

The coming into force of the Electronic Trade Documents Act last week in the United Kingdom is a potentially transformational moment in the development of electronic bills of lading. Despite exponential technological advances, the legal framework around e-Bills has lagged behind, with the essential problem being that English law - to which the majority of maritime contracts of carriage are subject – did not previously allow electronic bills of lading to be recognised at law.

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.

But what does this mean for Club Members?

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.

Why does the Group need to approve systems?

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.

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.

You can view the full statement from the IG P&I on the International Group's website.