Electronic Bills of Lading and Functional Equivalence

At the present time, Electronic Bills of Lading is used in order to replace traditional paper. Therefore,
EDI (Electronic Data Interchange) becomes the most important system because the most significant
benefits of EDI lie in its speed
2. The UNCITRAL Model Law on Legal Aspects of Electronic Data Interchange (EDI)
and related means of communication
The UNCITRAL adopted the draft Model Law on legal aspects of EDI and related means of
communication. The model law is intended to serve to serve as a model to many countries in order to
create uniform law. The objectives of the model law are essential to improve the efficiency in
international trade if the model law will be adopted by many countries. It helps to enable and facilitate
the use of EDI and related to means of communication. Furthermore, the model law applies to any
kind of information that is transferred in the form of a data message used in commercial activities.
2.1) Application of legal requirements to data message
EDI is defined by the model law, means the electronic transfer from computer to computer of
information. Besides, the model law2 introduced a new approach known as ‘functional equivalence
approach’ who is based on an analysis of the functions of paper based requirement.
2.1.1) legal recognition and evidential value of data message.
In many countries computerized record are generally admissible as evidence in court. However, in the
case where there is an original document a data message may not be accepted as the best evidence and
may be considered as hearsay evidence.
2.1.2) the requirement of writing or a document
The requirement of writing or a document is imposed by law in most jurisdictions. Section 25 of the
Acts Interpretation Act 1901 defined the definition of document that the meaning of document is not
limited only to a paper document. Moreover, the interpretation Act 1978 circumscribed that an
electronic message itself is not visible and cannot be included in the meaning of writing.
2.1.3) signature and other authentication
The function of signature is very important not only because it authenticates parties to a contract but
also evidences an intention to be legally bound.
The Hamburg Rules provide for signature in many ways if not inconsistent with the law of the country
where the bill of lading is issued. However, it is not certain that the courts will include an electronic
form of authentication as a signature so this uncertainty could be resolved by legislation.
2.1.4) document of title and negotiability
The UNCITRAL discussed on negotiability and transferability of rights in goods concerning maritime
bills of lading by considering from many countries and international organizations.

3. Other Attempts to overcome EDI’s problems

There have been other efforts by countries and other organizations to facilitate the use of EDI for bills
of lading such as UN/EDI and ICC.
3.1) the CMI rules for Electronic BILLS of Lading 1990
The CMI (Committee Maritime International) rules are operated by the carrier issuing to the shipper
an electronic bills of lading using electronic message together with a private code or key. In this way
the key holder should have the same rights as the bills of lading holder.
3.2) Project Bolero (Bills of Lading for Europe)
This project is operated by a business consortium of shipping companies, bank and
telecommunications companies and aims to replace paper-based shipping documents. The Bolero
services are based on the exchange of Edi message between registry and users. Users also will be able
to exchange message directly between them. The registry will contain details of shipping documents.
3.3) the carriage of goods by sea act 1992
This act replaced the Bills of Lading Act 1855. However, the act also provides an open provision to
extend its applications to cases where an EDI system is used.
3.4) Utah Digital Signature Act 1995
This act is the first legislation in the world authorizing the use of digital signatures.
3.5) the Australian Sea – Carriage Document Bill 1996
The Australian Attorney – General’s Department Discussion Paper suggested that any reform of the
legislation should include a provision to cover cases where EDI systems are used and the UNCITRAL
functional equivalence approach should be examined with a view to its applicability to electronic bills
of lading. Therefore, there would be creating the legislation.
4. Conclusion
Even though there are a number of rules that support the use of electronic bills of lading, there is still
a lack of international confidence in the use of electronic bills. This is because of difference features of
international trade and a large number of parties. Therefore, it is difficult to devise a comprehensive
EDI system for bills of lading. Moreover, UNCITRAL Working Group on EDI tried to develop
‘electronic transfer of rights’ to facilitate EDI transport document system.
2. This article deals with the legal impediments to the use of electronic bills of lading in the late 1990s,
and the attempts of various countries and organizations to eliminate those impediments. Legal
obstacles to the use of e-bills of lading included: 1) the requirement that contractual documents be
paper-based; 2) the requirement that bills of lading be signed documents; 3) whether electronic data
messages could, like their written counterparts, validly serve as independently negotiable instruments
that confer title to the goods shipped. These problems were further complicated by the nature of
international trade, which frequently involves many different actors, each with their own contractual
requirements. Several legal instruments of varying authority offered potential solutions to certain
aspects of these problems, but a coherent approach was still missing at the time of publication. The
legal instruments discussed were: the UNCITRAL Model Law on Legal Aspects of Electronic Data
Interchange (EDI) and Related Means of Communication (1995); the Committee Maritime
International (CMI) Rules for Electronic Bills of Lading (1990); Project Bolero, the UK Carriage of
Goods by Sea Act (1992); the Utah Digital Signature Act (1995); the Australian Sea-Carriage
Documents Bill (1996).
The UNCITRAL Model Law proposed a “functional equivalence approach” to facilitate the use of EDI
in international trade, which would legally authorize EDI to fulfill the functions of paper-based
documents despite their electronic character. Namely, Article 4 provided for the integrity of electronic
data as evidence in court, Article 5 gave electronic transmissions the same legal status as “writings” for
contracting purposes, and Article 6 stated that signature requirements were satisfied where the
contracting parties used any reliable and appropriate method for identifying the originator of an email
and his approval of the information it contained. These rules failed to resolve title and negotiability
problems.
The CMI Rules were procedural rules that could be incorporated into the contract by agreement of the
parties, in order to privately resolve some of the legal issues around e-bills of lading. These allow
parties to stipulate to the satisfaction of any writing requirement and use an electronic key process to
deal with issues of title, but the rules lack clear standards on offer and acceptance and have no
provisions dealing with system failure.
Project Bolero was a pilot project by a business consortium that was based on the CMI rules, and
sought to solve the authenticity problems of electronic contracting through digital signatures, and
through the creation of a central “registry” where details of all emails would be stored and access to
them restricted to control for authenticity.
The UK’s Carriage of Goods by Sea Act authorized the Secretary of State to make rules granting non-
written information the same legal status as written information, but did not deal comprehensively
with EDI.
The Utah Digital Signatures Act gave digital signatures formed via public key encryption the same
legal efficacy as handwritten signatures.
The Australian Sea-Carriage Documents Bill stated that electronic sea-carriage documents and
contracts are of equivalent legal status as their written counterparts.
Each of these legal instruments was helpful but ultimately inadequate in creating an e-friendly
international maritime trade regime.
3. In present, computers are used to facilitate international business activities; the full-fledged
electronic commerce is encouraged. Since electronic data interchange (EDI) system is rapid and
efficient, it is widely used among business community. There is an effort to use this system in shipping
industry, particularly bills of lading. However, it faces with technical and legal hindrances; namely
legal requirement of paper-based documentation.
There are many steps have been taken under the UNCITRAL Model Law to support all forms of
information transferred by means of a data messages which also includes maritime bills of lading.
This model law also enhances the legal status of electronic data messages as to paper messages
through functional equivalence approach. First, in respect of testimonial value, it makes clear that
data messages are documents and shall be accepted in court. It shall not be interfered by the best
evidence rule and the hearsay rule. The best evidence rule requires presentation of the best available
evidence. Without Article 8, if there is an original document, a data message may be considered as
hearsay evidence which means it is not the best available evidence. Next, where the law requires proof
of the form of writing, an electronic transmission, if it is accessible, shall be qualified as a traditional
writing. Regarding authentication, in order to identify the parties to a contract and provide evidence
of an intention to be legally bound, a manual signature is required in most countries. Nonetheless, this
law already envisages electronic signature in the definition of ‘signatures’. It should be noted that the
problem concerning the function of document of title and negotiability of bills of lading has not been
concluded yet.
In addition, there are many other attempts to facilitate the use of electronic bills of lading. For
example, the CMI rules which provides a voluntary set of rules, which will apply if the parties
incorporate into the contract, and a private registry system for electronic bills of lading. Under this
system, electronic messages are sent with a private code or key which entitle the holder to control the
goods. Transfer of this right of control can be made through notification by the shipper to the carrier
who cancels the original key and issues a new one pursuant to instructions of the shipper.
Notwithstanding this rules have not dealt with critical issues; for instance what constitutes receipt of
an offer. Moreover, there is no provision for a system failure. In contrast, the Project Bolero
establishes a central registry system which data messages will be exchanged between the registry and
users. There are more efforts on supporting electronic data transfer under national laws; for example
in UK, Utah and Australia.
Even though there are many supports on using of electronic bills of lading and the EDI system, there
is a scarcity of international confidence. One reason for this is that there are many parties involved in
an international sale; each may has its own documentary requirements which barrier to novate a
standardised EDI system.
4. At the present time, Electronic Bills of Lading is used in order to replace traditional paper.
Therefore, EDI (Electronic Data Interchange) becomes the most important system because the most
significant benefits of EDI lie in its speed
The UNCITRAL adopted the draft Model Law on legal aspects of EDI and related means of
communication. The model law is intended to serve to serve as a model to many countries in order to
create uniform law. The objectives of the model law are essential to improve the efficiency in
international trade if the model law will be adopted by many countries. It helps to enable and facilitate
the use of EDI and related to means of communication. Furthermore, the model law applies to any
kind of information that is transferred in the form of a data message used in commercial activities.
2.1) Application of legal requirements to data message
EDI is defined by the model law, means the electronic transfer from computer to computer of
information. Besides, the model law2 introduced a new approach known as ‘functional equivalence
approach’ who is based on an analysis of the functions of paper based requirement.
2.1.1) legal recognition and evidential value of data message.
In many countries computerized record are generally admissible as evidence in court. However, in the
case where there is an original document a data message may not be accepted as the best evidence and
may be considered as hearsay evidence.
2.1.2) the requirement of writing or a document
The requirement of writing or a document is imposed by law in most jurisdictions. Section 25 of the
Acts Interpretation Act 1901 defined the definition of document that the meaning of document is not
limited only to a paper document. Moreover, the interpretation Act 1978 circumscribed that an
electronic message itself is not visible and cannot be included in the meaning of writing.
2.1.3) signature and other authentication
The function of signature is very important not only because it authenticates parties to a contract but
also evidences an intention to be legally bound.
The Hamburg Rules provide for signature in many ways if not inconsistent with the law of the country
where the bill of lading is issued. However, it is not certain that the courts will include an electronic
form of authentication as a signature so this uncertainty could be resolved by legislation.
2.1.4) document of title and negotiability
The UNCITRAL discussed on negotiability and transferability of rights in goods concerning maritime
bills of lading by considering from many countries and international organizations.
3. Other Attempts to overcome EDI’s problems
There have been other efforts by countries and other organizations to facilitate the use of EDI for bills
of lading such as UN/EDI and ICC.
3.1) the CMI rules for Electronic BILLS of Lading 1990
The CMI (Committee Maritime International) rules are operated by the carrier issuing to the shipper
an electronic bills of lading using electronic message together with a private code or key. In this way
the key holder should have the same rights as the bills of lading holder.
3.2) Project Bolero (Bills of Lading for Europe)
This project is operated by a business consortium of shipping companies, bank and
telecommunications companies and aims to replace paper-based shipping documents. The Bolero
services are based on the exchange of Edi message between registry and users. Users also will be able
to exchange message directly between them. The registry will contain details of shipping documents.
3.3) the carriage of goods by sea act 1992
This act replaced the Bills of Lading Act 1855. However, the act also provides an open provision to
extend its applications to cases where an EDI system is used.
3.4) Utah Digital Signature Act 1995
This act is the first legislation in the world authorizing the use of digital signatures.
3.5) the Australian Sea – Carriage Document Bill 1996
The Australian Attorney – General’s Department Discussion Paper suggested that any reform of the
legislation should include a provision to cover cases where EDI systems are used and the UNCITRAL
functional equivalence approach should be examined with a view to its applicability to electronic bills
of lading. Therefore, there would be creating the legislation.
4. Conclusion
Even though there are a number of rules that support the use of electronic bills of lading, there is still
a lack of international confidence in the use of electronic bills. This is because of difference features of
international trade and a large number of parties. Therefore, it is difficult to devise a comprehensive
EDI system for bills of lading. Moreover, UNCITRAL Working Group on EDI tried to develop
‘electronic transfer of rights’ to facilitate EDI transport document system.
5. This article focuses on the legal obstacles to the use of EDI systems for electronic bills of lading, in
especially problems concerning the function of paper bills of lading as negotiable documents of title.
In 1995, UNCITRAL adopted the draft Model Law on Legal Aspects of Electronic Data Interchange
(EDI) and Related Means of Communication, and then it was confirmed in the UNCITRAL twenty-
ninth session, in May to 14 June 1996. Any kind of information that is transferred in the form of a data
message used in commercial activities can be applied to the Model law. Yet, the Model Law has no
legal force of its own.
The Model Law has discussed internationally the main issues related to EDI such as legal recognition
of data messages, writing requirements, signature requirements and documents of title and
negotiability. The writers agree that the main obstacle to the development of EDI is that The Model
Law is based on the recognition that legal requirements for the use of paper documents. Thus, it was
introduced a new approach known as ‘functional equivalence’.
The legal recognition of the computerised reports is generally acceptable in many countries such as
English courts. The importance of data messages, however, becomes valid in case of the absence of
the original document.
The laws in most jurisdictions impose and imply The requirement of a 'writing' or a 'document.
Nevertheless, the electronic transmissions are given expressly the same legal status as writings.
The function of signature is very significant not only because it authenticates parties to a contract but
also evidences an intention to be legally bound. In accordance of (the article 14 rule 3), all the
mechanical or electronic means are acceptable if not inconsistent with the law of the country.
However, courts do no accept the electronic signature except the High Court of Australia which accept
the facsimile signature . In contrast, in the context of the legal systems, the are many means to do for
the signature or other authentication, for example, using secret digital codes, similar to PIN numbers
used for automatic teller machines. The Model Law gives appropriate technical solutions that can be
seen in the article 6 of the Model Law which allows any electronic signature technologies to be
introduced in the future as appropriate without changing the law.
With regard to the document of title negotiability, the attempts in which electronic bills can
accommodate the negotiability and transferability of rights in goods or not, have not finished yet.
Other efforts have also appeared by countries and other organisations to facilitate the use of EDI for
bills of lading such as UN/EDIFACT.
In 1990, new Rules for Electronic Bills of Lading were adopted by The Comite Maritime International
(CMI). Additionally, the Bolero( Bills of Lading for Europe is the most recent pilot project on
electronic bills of lading.
The first legislation in the world authorising the use of digital signature is the Utah Digital Signature
Act 1995, whereas the latest attempt to bring electronic bills of lading into practice is The Australian
Sea-Carriage Documents Bill 1996.
6. International trade is moving to electronic commerce with the development of electronic data
interchange (EDI). However, there are two major obstacles, one is legal requirement of paper-based
documentations, and the other one is the development in term of computer technology. This paper
will be divided into three parts to discuss the legal problems. The first one is for examining the
proposals by the UNCITRAL Working Group on EDI. The second one will focus on other attempts.
The last one is the solutions.
1. In 1995, the United Nations Commission on International Trade Law (UNCITRAL) adopted the
Model Law on Legal Aspects of EDI and Related Means of Communication in order to serve as a
model to countries. And then it was finalized and approved in the UNCITRAL 29 session and is still
awaiting approval. The Model Law applies to all kinds of information transferred in the form of a data
message. However, the legal aspects of bills of lading are key issues. The future work could focus on
EDI transport documents. What should be noted is that the Model Law won’t have legal force of its
own unless they are enacted in national law.
i. Application of Legal Requirements to Data Message.
The definition of EDI, from the Model Law, is the electronic transfer from computer to computer of
information using an agreed standard to structure the information. The main problems and the
relevant solution are:(a) Legal recognition of data messages(b) Writing of a ‘document’
requirement(c) Signature requirement (d) Document of title and negotiability
The Model Law introduced a new approach named ‘functional equivalence approach’ which is based
on an analysis of the functions of paper-based requirements and determining how those functions
could be fulfilled through EDI.
ii. legal recognition and evidential value of data messages
The problem in this part is whether a data message can be treated as a document and whether it be
accepted as evidence in courts.
The ‘best evidence rule’ requires presentation of the best available evidence, which means a data
message can only be treated as the best available evidence when there is no original document.
The solution is given by article 4 and article 8 of the Model Law, which will never alter the legal
recognition and evidential value of data messages.
iii. The requirement of a ‘writing’ or a ‘document’
Referring to the Acts Interpretation Act 1901(Cwlth) and 1978(UK), the meaning of document and
writing is not limited to a paper one. So the Model Law gives it the same legal status as writings in
Article 5.
iv. Signature and other authentication
A manual signature is required by domestic and international law because it authenticates parties to a
contract and evidences an intention to be legally bound. Most provisions haven’t concluded an
electronic form of signature.
However, in EDI systems signature or other authentication can be done in many ways including by
using secret digital codes, digital signature and even a specific computer software.
Moreover, according to Article 6 in the Model Law, any electronic signature technologies can be
introduced in the future.
v. Document of title and negotiability
As for this title, the UNCITRAL Working Group on EDI has not yet finished, even though it is a key
function of bills of lading.
2. There are other efforts by countries and organizations to facilitate the use of EDI for bills of lading,
including the CMI Rules for Electronic Bills of Lading 1990, the Project Bolero, the Carriage of Goods
by Sea Act 1992(UK), the Utah Digital Signature Act 1995 and the Australian Sea-Carriage Documents
Bill 1996.
Conclusion: There is a long way to replace traditional paper bills of lading with an electronic one for
there is a lack of international confidence in the use of it, even there are a lot of supporters. We need
to pay attention to the future work of UNCITRAL which could bring legal support to this new method.
7. Nowadays, the use of computer technology to facilitate international transaction is increasing
moderately. The electronic data interchange (EDI) is the computerized system which is developed for
trade between nations that try to create model law to make the standards of electronic data
interchange. EDI system has been trying to develop the use electronic shipping documents instead of
paper shipping documents especially in bills of lading because of it is the important function for all
parties. Moreover, there are many countries and international organization try to facilitate the use of
EDI for bills of lading such as CMI, project Bolero and Utah digital signature.
EDI as defined means the electronic transfer from computer to computer of information using
as agreed standard to structure the information. The propose model law is to improve the
international trade and reduce all problems from the use of computer-based information by a large
number of countries. EDI is trying to provide equal treatment to users of paper-based documentation
and users of computer-based information by the creation of uniform law.
The using of Model law is depends on the recognition of the legal requirements that is the main
problem of it. It is introduced the “functional equivalence approach” that might be solved the
problems and fulfilled the paper-based documentation and users of computer-based information.
The best evidence rule is one of the issues that concerned by party that is the data message can be
accepted as evidence in courts. In some cases, a data message may be considered as hearsay evidence.
The model law is given the solution in article 4 and 8 the data message should not be useless solely it
is in the form of data message.
For the requirement of a writing or a document that are required from most jurisdiction, the model
law give the legal status as writing and electronic transmissions be equivalent. Moreover, this model
law can solve this problem by article 5 that a data message will be enough if the rules require the
information in writing document.
Signature and authentication is very significant because it can authenticate parties and evidence an
intention to be legally bound. Although there are some legal requirement for the manual signatures
that is not certain that the court will considered electronic form authentication as a signature, it can be
done in many ways such as the using secret digital codes; digital signature.
As stated in the introduction that there are many countries and international organization supporting
the use of EDI, there are also supporting the provisions supporting the provisions related to the use of
electronic bills of ladings.
The CMI Rules for Electronic Bills of lading 1990 – CMI rules are voluntary for parties to apply so
riles will operate into the contract when they applied. The rules provide the solution of writing and
signature that each parties and agreed to satisfy writing documents although the contract of carriage
requires the evidence in writing or signed.
Project Bolero (Bills of Lading for Europe) – this project is operated by the group of shipping
companies, banks and telecommunications companies to use an online computerized registry instead
of paper-based shipping documents. It is based on the CMI rules that will save time and costs and
security in term of fraud and possibility errors.
Although there are many rules from organizations that support the use of EDI rules in international
trade especially in bill of ladings, it is difficult to make the model laws that useable and cover all the
needs of each party. However, it is obviously that electronic transaction is increasing and it is very
useful in many ways. The cooperation from nations to facilitate the use of EDI and the time might be
shown the consequence of the attempts of EDI rules and many international organizations.