Paperless Trading - A Guide to Electronic Bills of Lading
Electronic bills of lading have been in existence for some time but their use has recently begun to increase significantly. In order to support Members in their use of such systems, the International Group of P&I Clubs (“IG”) analysed those offered by some suppliers in order to assess whether liabilities fall within Club cover.
Club Rules provide that liabilities arising in respect of the carriage of cargo under paperless trading systems are covered, provided that the system has first been approved by the International Group.
The International Group’s involvement in approvals has been to ensure that systems do not prejudice members’ P&I cover, given the previous lack of widespread recognition in law of E-bills.
Since 20 February 2010, the International Group has approved thirteen electronic systems and notified Members of those approved systems by issuing Circulars to their Members.
To assist Members to identify which systems are approved, from 20 February 2025, any system provider that approaches the International Group for approval of their system, and which meets requirements, will be listed on the International Group’s website. This includes ‘deemed approved’ systems. International Group Clubs will no longer issue circulars notifying of approval, as has been the case to date. Please see our Notice to Members No.22 2024/25 for more information.
The status of system providers that have been approved by the International Group to date remains unchanged.
What is a ‘deemed approved’ system?
The emergence of new technologies such as distributed ledger technology, and new legislation have acted as a catalyst for the development of E-bill systems. For example, in September 2023, the Group welcomed the UK ‘s Electronic Trade Documents Act (“the Act”), giving legal recognition in English law to electronic trade documents, including E-bills. The Act meets the requirements of the Model Law on Electronic Transferable Records (MLETR), a uniform model law adopted by the UN Commission on International Trade law (UNCITRAL) in 2018. Other countries have adopted, or plan to adopt, similar legislation. The International Chamber of Commerce (‘ICC Digital Standards Initiative’) provides information on legislative updates on a country-by-country basis here.
Under the Act, the effectiveness of an E-bill is predicated on the system being reliable, and the Act sets out a reliability test. Whilst this is strictly a legal test, it is in fact a technological one in that the law will be satisfied provided that the technology meets certain requirements of reliability. Since the Act came into force, industry bodies have been reviewing industry standards to establish reliability and common standards for all stakeholders. The ICC Digital Standards Initiative has launched its digital trade reliability assessment tool. To date, the International Group is not aware of any other similar initiatives that have been launched.
In light of these legislative, industry and technological developments, the International Group Clubs have now agreed to further revise their approach. From 20th February 2025, systems will be ‘deemed approved’ if they meet the following criteria:
i) the system permits compliant E-bills only, meaning that they are subject to a governing law which gives legal recognition to them as equivalent to paper bills of lading; and
ii) the system is reliable and is evidenced as such by:
an audit by an independent body; or
a declaration by a supervisory, regulatory or accreditation body or applicable voluntary scheme; or
applicable industry standards.
If a provider meeting the deemed approved criteria wishes its system to be listed on the International Group website, they are recommended to contact the Group Secretariat with supporting evidence of how the criteria are met.
All systems that have successfully completed the existing International Group approval process (both past and future) will also be listed on the International Group’s website.
Members are reminded that other exclusions of cover under Group Club Rules relating to the carriage of cargo will, of course, continue to apply in respect of all the IG-approved providers in the same way as for paper systems.
These exclusions include;
a) discharge at a port or place other than the port or place provided for in the contract of carriage,
b) the issue / creation of an ante or post-dated electronic document / record, and
c) the delivery of cargo without the production of the negotiable electronic document / record, which-in the case of an approved electronic trading system-will mean delivery of cargo other than in accordance with the rules of that trading system.
Other unapproved systems do exist. If Members use unapproved systems, then they will have the additional hurdle of proving that the liability would have arisen even if a paper bill had been used before Club cover can incept.
Like the use of any electronic data system, the use of all paperless trading systems carries with it potential cyber risks. These do not fall within Club cover (see FAQs, below).
BIMCO
BIMCO has published an Electronic Bills of Lading Clause for use in charter parties as follows:
BIMCO Electronic Bills of Lading Clause
(a) At the Charterers’ option, bills of lading, waybills and delivery orders referred to in this Charter Party shall be issued, signed and transmitted in electronic form with the same effect as their paper equivalent.
(b) For the purpose of Sub-clause (a) the Owners shall subscribe to and use Electronic (Paperless) Trading Systems as directed by the Charterers, provided such systems are approved by the International Group of P&I Clubs. Any fees incurred in subscribing to or for using such systems shall be for the Charterers’ account.
(c) The Charterers agree to hold the Owners harmless in respect of any additional liability arising from the use of the systems referred to in Sub-clause (b), to the extent that such liability does not arise from Owners’ negligence.
The Electronic Trade Documents Act
The Electronic Trade Documents Act came into force in September 2023 in the United Kingdom, giving legal recognition in English law to electronic trade documents, including electronic bills of lading. On the day of entry into force, the International Group of P&I Clubs released a statement which read:
“The Group welcomes this significant legislative development, which comes soon after the adoption by Singapore of similar legislation, in the form of the Singapore Electronic Transactions (Amendment) Act 2021. Both sets of legislation meet the requirements of the Model Law on Electronic Transferable Records (MLETR), a uniform model law adopted by the UN Commission on International Trade law (UNCITRAL) in 2018.
Club Rules provide that liabilities arising in respect of the carriage of cargo under paperless trading systems are covered, provided that the system has first been approved by the Group. Since 20 February 2010, the Group has approved ten electronic systems. The Group is reviewing its approach to electronic bills of lading in light of the Act. At the same time, we continue our dialogue with industry stakeholders to assist in managing the transition from a private contractual environment to one recognised under national laws, which will serve for the benefit of the wider international shipping and trade community.”
For the full statement, see the IG P&I website.
The International Group has also produced a document addressing Frequently Asked Questions around the Electronic Trade Documents Act and the International Group’s role in the approval process of e-bills platforms.
FAQ's
In considering the use of a trading system that features electronic bills of lading, the Clubs wish to ensure that such a system ensures performance of the three functions of a bill of lading which customarily underpin P&I cover, namely: as a receipt, as a document of title, and as a contract of carriage which incorporates the Hague or Hague-Visby Rules.
b) To the extent these liabilities would have arisen because an electronic bill of lading has been used instead of a paper bill of lading, cover is discretionary unless the electronic trading system has been approved by the International Group.
It is always advisable to check that the system preferred bears the correct designation and is the approved version. A further electronic system Members may encounter in the Brazilian cabotage trade is CT-e/DANFE. The CT-e document is a fiscal note, while the accompanying DANFE document contains the terms of the contract of carriage which are mandatorily subject to Brazilian law. CT-e/DANFE contracts are traded through an electronic platform (though both documents can be printed). However, in contrast to the systems described above, CT-e/DANFE contracts of carriage are non-negotiable and cannot be endorsed to third parties; the carrier must always deliver to the named consignee, whether or not they still own the cargo.
The IG Clubs’ position is that the CT-e/DANFE system does not fall within the paperless trading exclusion. Therefore, Members’ use of this system will not have any impact on Club cover for P&I liabilities.
Yes. You will have Club cover for P&I liabilities arising out of the use of one of the approved systems (though not for liabilities which are of a non-traditional P&I nature-see Q6) and thereby avoid exposure to the risks connected with the use of a non-approved system as described in Q5. However, it is important to note that all exceptions and exclusions under the Club Rules continue to apply (as they would with a paper bill of lading). This includes the traditional exclusions of cover relating to the carriage of goods, such as:
-The issue or creation of an electronic document/record with a description of the cargo or its condition known to be incorrect;
-Shore delivery where an electronic document/record is issued or created for an amount of cargo greater than that known to have been loaded;
-Discharge at a port or place other than the port or place provided for in the contract of carriage.
-The issue or creation of an ante or post-dated electronic document/record; and
-Delivery of the cargo without production of the negotiable electronic document/record.
These are non-marine risks, and may be covered by your own business insurances. This is something which you can check with your non-marine business insurance broker.
These are not in the nature of P&I risks. In insurance terms, they may be described as ‘”cyber-risks” or business risks.
No. The contractual terms for approved systems make clear that any convention, treaty or national law that would have been applicable to carriage undre a paper bill of lading will equally govern the carriage using an electronic document or record. Thus, so long as the carriage is subject to Hague or Hague-Visby Rules by reference to the terms and conditions incorporated into the electronic document/record and/or by application of convention or national law as if a paper bill of lading had been issued, then there will be no problem with Club cover.
If the carriage is compulsorily subject to another liability regime such as Hamburg Rules, then again Club cover will remain in place as it would if the carriage were under a paper bill of lading.
Members requiring further assistance should direct enquiries to their usual contact at the Club or to Erin Walton.