Achieve Compliance with Digital Signature Lawfulness for Shipping in India

How to eSign a document: digital signature lawfulness for Shipping in India

okay so hello everyone who's uh attending in person and online uh thank you very much for joining us um this session is about the law commission's recently published reports on electronic trade documents um i have here the law commissioner for uh commercial law and the common law uh sarah green uh who will be talking through the uh reports the the findings in the report and the policy uh and the law that the the draft bill which we have proposed in the report um i have checked with the panelists and they are all very happy to introduce themselves so i will not be reading the little bios i got from the internet which probably everyone will be relieved about um i will introduce myself as well my name is miriam goldby i'm professor of shipping insurance and commercial law at the center for commercial law studies at queen mary university of london sorry that's a bit of a mouthful but that's that's what i do and i'm i'm very very honoured to be chairing the session today i was on sarah's team working on the consultation paper and the report so i feel very very proud of this piece of work there you go um in paper form in paper form in paper form it's about electronic trade documents but it is in paper okay so uh we shall start with um a presentation uh by sarah where she'll take us through the main features of the report and the draft bill and then we will have a panel discussion um and as i said earlier each of the panelists will introduce themselves at that point i will tell you their names now uh so uh matthew uh cox is partner with hfw mark bratman is claims director and legal advisor at itic and uh yash kulkarni is a qc at quadrant chambers so sarah over to you okay thank you very much um so as mariam said i'm sarah green and i'm the current law commissioner for commercial and common law just as a little bit of context before that um i was a professor of um obligations and private law at the universities of oxford and bristol not the same time one after the other um and my uh interest as an academic and a lot of my academic writing so full disclosure was on this area a broader version of this but essentially a lot of the work and the research that i did was about um legal change and any legal change that was necessary in order to accommodate intangibles and non-conventional goods and non-conventional assets so that really i think explains probably why um i uh well both wanted to be involved in this project and and maybe why i was given the opportunity to do so as well so this is something that i have and certainly no one knows this that i have been talking about for a very long time so it was um a great privilege and a fantastic opportunity to get the um chance to do this work and to talk to people who were going to be affected by it in the real world and to come to the conclusions that we came to so that's my background um as you can see i do have it here it is also available in electronic form i should make that very very clear um and we are now in the process i mean officially right so we at the law commission we are an independent body i'm sure you all know this but it is worth emphasizing for process terms so we are an independent body we have um areas of law reform referred to us by government but we then conduct our own independent highly consultative very important highly consultative process um in order to establish whether any law reform is needed and then what that law reform should look like um so we first did a consultation paper which at the last panel event here back in september we were talking about that we have now got our final report and bill which is now in the hands of government it was some of you may have seen in the queen's speech on the 10th of may which means that it will be in this session it is now however out of my hands so as an independent body the law commission we hand our recommendations and draft legislation over to parliament and then we have to wait and see what happens there is what's called a law commission special procedure which means that where there is an uncontentious bill um that the process is slightly shorter and slightly briefer than it would be so it doesn't go through full reading on the floor of their house a lot of that um work is done in um committee forms so it can be a lot quicker and that's what we have in mind for this bill at the moment but beyond that i know i'm bound to get questions about timing i'm afraid i don't know other than that it will be in this session i have no um clue at the moment about exactly when and where it will come up so that's the background essentially um so those of you who've heard me talk about this at consultation paper stage nothing in terms of the substance or the policy has really changed at all this was a really really interesting and um i mean i suppose in some ways very easy project i'm going to qualify that in a minute it was an easy project in that there was a huge amount of support if not a consensus in favor of the objective of where we wanted to get to so of course if you think about some of the other law commission projects that not just my team does but if you think about you know hate crime you've got um surrogacy um there are all sorts of issues where there are an awful lot of different perspectives on how or indeed whether anything should be done at all that was not the case here everybody we spoke to and we speak to people across the board whether they're end users whether they're platform developers whether they're legal advisors there was a really really gratifying amount of support for the end objective and that has not changed since consultation paper stage however and i do wear this as a badge of honor now we have internal parliamentary councils so opc is responded to the law commission and sometimes as he a law commission is asked to provide draft legislation it doesn't always happen um and um i'm sure you won't mind me saying that uh the the parliamentary council who worked on this who is um just amazing did say it was one of the most difficult things in terms of drafting that he'd been asked to do all six clauses of it so it's short it's sweet it's to the point but any changes that have occurred since consultation paper stage have been about the drafting and about the nuance and about the detail and actually that has been surprisingly difficult even though our policy has has not changed at all so what is that policy that policy is basically to remove the current blocker that the common law has to accommodating what it regards as intangible things within a law of property which depends as we all know particularly you know the obvious example being bills of lady which depends on the ability to possess the ability to hold the ability to transfer of course historically in a very tangible physical sense what we wanted to do and what we hope this does do is remove that blocker and say it's not necessary for something to have a conventional physical tangible form in order for it to have exactly the same legal function as those things that historically did um so there you go that's that's basically in a nutshell we wanted to do it in the least interventionist way possible because of course we all know that most of these commercial rules work extremely well we certainly don't want to be wading into the certainty that is english common law and changing things that do not need to be changed so we were very conscious we were sort of tiptoeing around those things that we wanted to leave alone we spoke to consultees to make sure that the changes i've said to you that those constitutes were a broad range of of people and parties and organizations to make sure that what we were doing would not break anything that already works and continues to work well that's why it's such a short bill we really are trying we really were trying to hone in on this blocker and getting rid of it and it sounds so easy so um so what we did is we thought that the best way to do it would be to adopt principles so rather than sort of setting out particular categories of things we focus on principles which we extracted from the common law approach to holding and possessing and so when an electronic thing i used deliberately to be generic where an electronic thing exhibits these factual and legal characteristics that are completely analogous with those tangible things there is no reason why it cannot be possessed and have the legal consequences of possession and this i mean it's a bit of a perfect storm really when we were um thinking about making these reforms they're not the only reforms the law commission is considering for intangibles we've got a broader project on digital assets and which includes things like cryptocurrencies and nfts now of course historically and i think the reason why possession has become associated with these abilities to transfer to divest oneself completely of something and for somebody else to get that thing is because historically all the things that we wanted to possess that we wanted to hold that we wanted to transfer were were tangible um it just wasn't a question that used to arise whereas now of course it does arise all the time most of what we want to transact with and in relation to are intangible things well we could have an argument about whether they're intangible or not whether electronic things are intangible or not personally i don't think they are but i also don't think it matters i think that is a touchstone that has outlived its usefulness so what we said is okay what was it about those tangible things that made them amenable to possession and divestability and transfer that they have an independent existence so that's to set them apart from true things in action like a debt which of course only exists so far as there are persons who lay a claim to it and a judicial sorry a legal system that recognizes it so if something is independent of that legal system and of persons it's not really a thing in action and digital assets and electronic trade documents which are a subset of that have that quality they're going to exist whether or not we lay claim to them they are there on a server somewhere also when i said the perfect storm thing um there was this there has been this of course uh development of digital assets and the demand for digital assets and there has also been the development of technology which allows those things to happen so historically again with intangible things the problem was double spend now of course with distributed ledger technology you can get around the double spend problem with electronic intangible things and so that was the next one of our principles so we had independence we then said if you can transfer something and divest yourself completely of it which distributed ledger technology allows then why can you not possess it and hold it in the same way as you can for conventional states and amenability to exclusive possession which is of course very important if what we're talking about is a documented title if you have an interest if you have that documented title you need to know that that can't be duplicated and double spent so you then have three principles or three characteristics we set them out in this report and say where a document we're certainly not saying that all electronic documents of any type can now be subject to um possession illegal for legal purposes in a legal context we're saying where they meet these characteristics and they can exhibit these characteristics then they should be treated basically as equivalent to their paper counterparts so we say you can possess them you can divest yourself off them um anything that is done in relation to them um will have the same effect as those things done in relation to the paper equivalent in doing this do you tell me to shut that when you want to um in doing this um we have kept a very close eye i'm sure you're all aware that we're not the only jurisdiction that's grappling with these issues and of course they're in the u.s and we have the modern law on electronic transferable records which miriam is very heavily involved with and we're all as i said at the start everybody is aiming to get to the same place in the end we have worked very closely with people involved in those other developments and what we have done is compatible with those approaches the only reason that we haven't sort of implemented it wholesale is well firstly it was never intended for that um it was intended as the name suggests as a model from which jurisdictions could pick and choose the bits that suited them and also that we have this english law problem with possession um which we hope will be a problem for not much longer um but we needed i think to grasp the nettle of possession and explicitly um give the court's guidance that they could move past that intangibility touchstone so that's a question i get asked quite a lot we have developed i think our rules it's true to say in step with what other jurisdictions uh are doing um i think those are the main uh point although i know the other thing i wanted to say because and this relates to other jurisdictions of course it is not going to be the case immediately and i'm sure we'll come on to this later i hope we do that this is going to be possible in every jurisdiction and by their very nature these documents are of course used in cross jurisdictional and transactions so there is also part of the bill which says that um those documents can be converted from one medium to another and it will not affect so you can have an electoral trade document that's been converted from paper and it can an electronic trade document can then be converted into paper if necessary and it will not affect the um implications of this bill so i think i'll finish there i'm more than happy to answer any questions but i've taken you almost 1820 start of the panel discussion um so um the first question uh i've prepared is for mark um and mark what does this mean what does this uh what do these proposals these recommendations mean for people on the ground uh such as shipping agents who process cargo's issuers of lading work with these documents on a daily basis thank you um i'm mike bradman i am the claims director of itic and as miriam was saying uh we ensure we are probably the world's largest insurer of ship agents and it will be the ship agents that are the people that deal with these bit of ravings more than anybody else so they've got their concerns and they they sometimes bring that to us that's sort of almost an industry representative of them even though we're not technically that um i'm the claims director as i said i've been there for 18 years i've handled these things prior to that i was solicited answers that would have practiced the door anymore um so what they do is they come to us and they generally ask us three questions the first thing they ask us is are we insured to deal with this sort of thing and the answer to that question is yes they are we don't see it any differently particularly to the paper uh bills of lady and at the moment we operate in the same way that p i can't operate in that they recognize i think it's currently six systems that use uh electronic bills and they're approved by the international group for the ig group you'll see um seven oh is it seven now you have seven yeah um so as long as it's approved by the ig we will deal with any claims that arise from that um so that's the first thing that they always ask can you do it the second thing is i say what sort of claims do you think we will see uh if we deal with these uh electronic bills believing and again the answer to that is we we're professional indemnity insurers so we deal with mistakes that they make so the sort of mistakes that they make on the paper bills we still think will happen on the electronic bills and most of them come from entering in data incorrectly so you know the cargo has to be at minus 18 they put plus eighteen uh the cargo wants to go to san diego they mishear it put down santiago so if it goes to the wrong place and it's all those sort of claims and we think that whilst there's still humans involved dealing with the data they'll still be those types of claims what we think we'll see less of is delivery without bills of labeling without paper because it's the system should hopefully stop that from happening um although that then brings up other issues and you know it depends how it works is my next question but i'll come on to that um but we can envisage that there will still be times where there won't be a bill of lading for some reason i.e the computer system has crashed or that there'll be something or other to stop it so we still think that we are going to see those questions and obviously as a professional insurer we still welcome the ability for the uh agent to make a mistake otherwise we'll be out of business so we still need them to be able to make mistakes occasionally uh but we do think there'll be less uh on that and then the third question that we get and this is a question we get asked most and is probably the one we don't actually know the answer to yet is how will this system work because the agents are driven by their principles so if the principals want to do this and use this they'll have no choice in the matter and there's different types of agent uh you might have heard of a liner agent they work for a line the line will probably have their own system developed like burst or msc or whoever it has to be and that minor agent will use that system and everything will hopefully go quite well but there's other agents that have 10 20 30 50 different principles and they're concerned as to how they'll operate and whether they'll have to use 50 60 different systems um i don't know how you're probably aware but at the moment my understanding is with the current seven systems that are available because of the uh the english laws uh reluctance to currently uh deal with the bills rating as they should um they all the parties to the transaction have to enter into a contract and that's kind of how it's dealt with so if if they want to use the valero system for example you can use that to suppose when it comes to mine everyone in that part the carrier the shipper consignee the agent everybody has to sign a contract to say we all agree to use this and it will have the same uh legal function as a paper bill what they're hoping is that with this change of law it'll be slightly different and you won't all have to sign up to these contracts and systems so their main concern and this is something i mentioned last time is will it be a system and is this example i used would it be a system like where the agent would have to sign up for sky television netflix amazon prime disney plus every such one which cost them a lot of money and obviously their main concern is who's paying for this or will it become a system like an email where it doesn't matter whether you're on outlook or gmail or apple or whatever you can still send emails to other people with whatever system they're on and their hope is that it will become that type of system but as i say we don't actually know how it's going to work yet you know eventually the technology will produce i'm sure some system where everybody can use the same uh platform and uh and that's it really for for the agents i know it doesn't completely answer the question actually raised a few other questions but that's the position at the moment yes and and you're quite right mark that there's there's quite a lot of work being done on uh technological uh standardization um so so there's work being done by the digital standards initiative of the icc by the digital container shipping association and bimco has have also signed up to something called the future international trade alliance so so bimco fiata dcsa dsi that they're all getting together to make sure that these standards that are being adopted are well standardized across the industry and not you know not not developed separately for shipping and for trade finance uh and for shippers etc so so there's quite a lot of work being done on that and the the ultimate aim is for the platforms to be able to talk to each other to make it much easier um for for these exchanges to take place and then of course as you said there's the legal standardization which is precisely the point of of what this whole project was about um so so sarah any any views on the benefits of having these legal standards and saying these things all have to follow the same criteria so so no matter what system you set up these criteria might must be met yeah so again when we spoke to um those organizations who were going to be developing uh either from spatula or developing the systems they already have to fit within um our proposals there was um i mean inevitably it's not really a surprise there was um a bit of a chicken and egg scenario going on because some of those organizations understandably didn't want to put a lot of resources into developing these systems if they weren't sure or until they're they're sure that the um the end performance of what they develop is going to have the legal recognition that they intend it to so i think that will and i hope that if this bill is passed um and we have this absolute certainty in statutory form that that will provide real impetus for the industry to feel that they can develop um these standards and of course the hope is always going to be that they will be interoperable i mean i suspect it's been a long time since i worked in the technology industry but i suspect the fact that that certainty is there and that the standards are quite clear and quite few i mean part of me thinks surely that's going to make interoperability both more possible and more beneficial for all of the parties involved i mean that's and i was saying yesterday i'm an eternal optimist and i'm sure that's a that's in some ways an incredibly optimistic thing to say but i don't think it's beyond the realms of possibility and there was certainly an anticipation from the technologists who would be responsible for developing developing these systems that want this certainty was there they were sort of raring to go and then they could just you know go on and and take full advantage of the certainty and then the consequential increased demand well i mean i say increased because as marcus pointed out it's already they're already used um there just has to be contractual agreement whereas once that contractual agreement is no longer required and they are just they have the effect they want to do that the parties want them to simply by the virtue of existing um then obviously that makes everything a lot uh simpler um and a lot more robust you know in insolvency situations and so on so in fact one of the questions we got most during the consultation was is this going to be compatible with the mldtr everyone seemed very interested in the extent to which this was going to be compatible with the mldtr because they want one standard they want one set of criteria that that they can satisfy and following on from that that they're you know they can operate across the board um and uh yes if you look at the bill there's there's a lot of compatibility there's a lot of uh um common ground with the mletr in fact that the most recent uh published version of the bill that was published with the report also includes a reliability standard that is uh closely based on the mletr standard and an integrity standard uh which is also [Music] in line with what's in the mletr so um uh i i think yes the the legal standardization aspect of it um is going to as you said sarah um probably generate more activity in this field we keep our fingers crossed and my next question was from matthew and it's it revolves around what do you think the impact of this uh um having this legal standard uh is going to be do you think it could be a a game changer and and what does it mean for the market in terms of opportunities and challenges thank you so good afternoon everyone i just introduced myself uh my name is matthew cox i'm a lawyer with the international law firm hfw my day job is advising basically mainly focused on commodity clients so i act for commodity traders commodity producers and then the finances the banks and the funds that that finance international trade and commodities so so this topic is very much um you know it's a great interest to to my practice and my firm's practice and we are i would say i think the question was what opportunities are there in the market well i think we take a very optimistic position um i i've lost count of the number of meetings i've been in uh with fintech clients and digital platform providers and there seems to be an unwritten rule of those kind of meetings that the tech guys go first and they describe all their technology and they describe how wonderful it is how easy to use it is and kind of optimism goes up between that part of the conversation and then it seems like the lawyers always have to go last and traditionally our role is to then burst the bubble depress everybody and then point out that there's no legal recognition for any of these new digital instruments so i'm heartily sick of having those kind of kind of meetings um and i think some of the other panelists have said the reason you know the drawback has always been the english law does not recognize possession of electronic documents i think there was also issues with recognizing the electronic endorsement instead of having wet ink endorsements on bits of paper so our view hfw is that the new legislation the new bill that we hope becomes legislation will completely solve those those issues and i think i think what that will mean is that going forward lawyers like myself we will be able to give clean english or legal opinions saying electronic digital warehouse receipts or digital bills of exchange or digital bills of lading are legal valid binding and forcible and they will be recognized more generally and not and not just only recognized in the context of uh these kind of club digital platforms that we have at the web um so so i think i i think that the you know this is changing english law will as a matter of english law really make remove that big block that's been been holding this back um so then and and also anecdotally i mean we're hearing from our clients we we act for um the fintech guys and the digital platforms we also act for quite a few of the innovation teams within big banks and the traders and already they're you know we're hearing from them anecdotally that they're following the consultation process very closely um that they're already some of the digital platforms we have for that they're already asking us what do we have to do to make sure we fall within the ambit of that legislation should it come through so so i think they can see the opportunities for their business um and we we remain really optimistic uh i'd say the challenge i see sort of two challenges to the question is everybody that the day after the the legislation comes in is everything a switch over to electronics i think we all know that won't happen on day one but um there's obviously going to be some inertia i mean i think however many you know when you talk to different organizations they they always want to be innovative but i think quite a lot of people deep in their heart in their heart parts they kind of actually want to be the second person to do it rather than the first um you know and so i think this part of looking at what other people are doing how the market is reacting so so that's i think part of it and then i also think the stumbling block that really remains from a legal point of view has already been touched on which is the international recognition point um because even though you fix the english law position i don't think it's as simple as just saying right we're going to choose english law to govern our transaction and that solves all the problems uh because the the instruments we're talking about are cross-border and it you know it's not they're not just you know every transaction will involve at least two two different legal systems two jurisdictions and if you take the case to say warehouse for six which is one of one of the instruments um i think you'd always you'd always have to look at what the local law of the jurisdiction which warehouse is located says if you're talking about bills of lading then you've got to think about where is the ship going to end up and what does the law of the reports of loading and unloading say about recognition of these kinds of instruments and even with bills of exchange which don't really relate which are purely contractual and don't relate to any kind of physical asset um even there you have you always have multiple multiple parties to a bill of exchange and i think you'd always have to look at what's local say in the jurisdictions of the different holders of the village bill of exchange um but i think we've already heard actually even there i think there's quite a lot of optimism because as we heard from sarah there's you can you can look at um the international rollout of equivalent legislation so we already have i think there are is it right there are six jurisdictions that are signed up to the mlcr and then we have singapore's enacted legislation last year my understanding is that in france there's a working group looking at french law and they're having a sort of meeting tomorrow and in germany as well in germany so i think i looked it up there's 193 member states of the u n and we've got something like nine jurisdictions that have either already enacted legislation or are looking at it so i think the question is do we have to wait for the other other 180 whatever different countries and jurisdictions to pass equivalent legislation um i think if that was the answer we've been waiting a very long time but i think actually we don't have to wait for the rest of the world to fall in line because um if you take the example of warehouse finance for example i think if if the jurisdiction in which the warehouse is located recognizes an electronic warehouse as a document title let's say i think you can do you could do an inventory financing of that warehouse using an electronic warehouse warehouses don't move around i think i think that would be perfectly feasible for finances to look at doing that [Music] and then as more jurisdictions pass similar legislation you know that that would just mean more jurisdictions could do that kind of thing um have have electronic inventory finances instead of doing doing it based around bits of paper um i think bills of lading may be more complicated because even if you're happy that the port of loading and the port of unloading are both in jurisdictions where there's recognition of electronic bills of labor i think there'd still be a concern particularly for the finances that what happens if something goes wrong and the ship ends up at a report that it that it wasn't intended to maybe in an insultancy or or a fraud or a dispute situation so i think that would still be a bit of a drag on that but i can see a way where you don't have to wait for the whole world to fall in line before this can start happening and then hopefully governments around the world will will start to feel that they need to do enact similar legislation because there's a fear of getting left behind and missing out and that could be that could be the tipping point so overall um for the first time ever i think we now see a path to being being able to give clients a really optimistic uh advice and then to say you know we think these we think these transactions are definitely now doable electronically in at least some jurisdiction so two challenges basically the status quo bias which is uh a very good reason in my view why we didn't move away from the session we wanted the electronic versions to work the same way as paper versions did legally because people don't like change um and uh the second challenge is uh basically it's it's all gonna depend a little bit on on the conflict rules in in the court that here's the dispute isn't it um and um on this the law commission is also doing some work yes so well we're about to start we haven't started yet so um we've got a few projects at the moment that are all fairly interdependent to some extent so we did smart contracts last year we finished smart contracts last year we've got the broader digital assets project that i mentioned before this one and we're about to start one on decentralized autonomous organizations as well and talking to um consultees for all of those projects these issues and conflicts issues just kept coming up and so we are starting in a couple of months a dedicated project to private international law issues arising in relation to digitized assets because of course the questions about where are they geographically located i mean they're both sort of difficult to answer and not necessarily an authentic exercise where what we're talking about is digital anyway so um yeah watch this space basically on on those issues i think it's also worth um saying at this stage and i think you'll agree from i mean obviously you were present a lot of these conversations in relation to other jurisdictions and whether they're going to move or not the perfect storm that i referred to at the very beginning the other element to that was of course the pandemic and lockdown and the inability of people physically to interact and that i think gave an extra impetus to government to sort out quite a few issues that related to um physical passing of things again being very generic um and i think there is there is i have certainly sensed through this project an impetus across the world for these movements now to happen and when we were speaking to international counselors quite a few of them were asking very practical pragmatic questions about how do we do this in our jurisdiction how do we get on board and quite a few people also told us that there was a certain amount of anticipation waiting to see what english and martial was going to do about it you know if you move then we're going to move for the obvious reasons you know the way that we all know that english law is perceived and used so i think that in itself is also quite encouraging i do think not only will these reforms um lead to technological developments i do also very much hope but i have good reason to believe that they will also um create a sort of international movement in terms of adopting mletro or something very similar excellent and then my final questions are to yash um so in in in the context of disputes that are likely to arise [Music] in in this field how well equipped do you think um clients are to basically enter into agreements enter into transactions based on on these developments and and how well equipped other courts to resolve disputes in this field well i mean so looking at some questions how the change might affect dispute resolution in england and whether the courts are equipped to deal with it mean i i think the answer to that can be pretty short to be honest in terms of how i think the changes are going to affect dispute resolution i don't think i'm doubtful it's going to affect dispute resolution very much and that's a good thing uh i think this was the least intervention approach that the law commission's adopted means that these electronic trade documents should pretty much slot into the rules and principles that already exist dealing with their paper equipment so that's quite a good thing i don't think it's going to cause any great disruption in the in the dispute resolution sphere and in terms of other courts equipped to deal with the disputes that arise my view is resoundingly yes i think they are um i mean where i think you might get where you might get some sort of court involvement two broad issues two raw areas i think one of which you touched on already the first i think would be interesting to see how the courts apply well understood legal principles that already apply to electronic documents so it takes something like possession concept possession when do you possess an electronic trade document the bill is deliberately silent on that and that's a good thing because those sorts of uh those sorts of concepts will be uh determined by the course using the same sorts of principles they applied in the possession anyway factual aspect and intention aspect so do you have it and do you intend to use what you have so in the context of something like an electronic trade document say you're talking about a document on a a dlt system a distributed ledger system um i imagine things like factual control will be assessed by reference to who's got the private key for it so who's got the particular code that can access it um kind of a controlled uh central control registers who's got the relevant login details i imagine that'll be the first bit factual control bit and then you get the interesting question of what if lots of people have got the private key how do you assess who's got possession then but i think that's just the same kind of analysis you have when um and the law commission refers to this in their in their paper same kind of analysis you have when a number of people have the keys to the same warehouse and you just assess all of them well some may have the administrative capacity some may have had them in a prior capacity where they intended to exercise possession but not now and the courts would effectively carry out this fact sensitive analysis that would look at both components and so so one area where i think the courts will get involved is just explaining how these well-established concepts apply to electronic trade documents and that's also in the context of delivery and acceptance and rejection but that's where i think we'll see some course involvement and i think the courts are eminently able to do that the the second area is an area that's been touched on and it's private national conflict laws issues now i know the law commission is going to be dealing with that and they're going to be looking at that and that's going to be very welcome uh for my part i think pending that uh i the courts would in any event be pretty well equipped to deal with those issues because conflicts and law issues are part of the regular diet of the english commercial court the charleston division those sorts of issues arise when you have two parties in different jurisdictions transacting in a way where goods move a number of different jurisdictions to get from a to b or where performance might be in a third country those sorts of issues arise all the time and well-established rules have already risen in relation to the jurisdiction and the applicable law uh through those kinds of disputes given that electronic trade documents are not intended to have a hugely destructive effect and they're supposed to just slot into the position that paper documents have i would have thought those rules would carry on applying so you may have questions that arise about well how do you characterize this dispute do you characterize it as a contract dispute so do you apply the private international law system that applies to contract disputes or do you characterize it as a property dispute because uh this asset or this this document is a piece of property those are the sorts of debates you have now anyway so i don't really see things changing as such it's just you're having a debate about a slightly different form of document than you previously did and again i think i think the english sport can certainly deal with that i mean i appreciate the english sports only one part of the picture if you're looking at the the broader situation around the entire world but i can only speak to the english courts and i think they'd be pretty well pretty well set to deal with those things so i suppose to answer your question i think the courts are well equipped to deal with the issues that i arise and that should hopefully give clients confidence to um take a step into engaging those documents now i mean things like jurisdiction think sometimes this might be more of an illusory problem than a real one than a real practical one because invariably lots of your electronic trade documents if they're going to be similar to the paper equipment will incorporate terms of a contract or they'll be intrinsically so closely linked to an underlying contract that nowadays most contract sophisticated contracts contain an arbitration agreement or jurisdiction clause so i imagine things like jurisdiction will just get swept up then the arbitration clause the jurisdiction clause of the underlying contract so it may be a theoretical problem but i'm not sure how frequently it will actually arise electronic trade documents hopefully have a bright future fantastic so so hopefully most disputes would be characterized as contract disputes anyway so that uh dispute contractually agree dispute resolution clauses will apply i suppose it's just it's slightly different with property it is characterized characterized as a property dispute it's slightly different because then the lexitis will kick in but um [Music] it's just very reassuring to know that these issues arise anyway whether you're using electronic wallpaper documents so um uh that's that was all the questions i have prepared for the panelists myself uh we're back on time so uh the um planned 10 minutes for questions from the audience are available so so please do pipe up if you have any questions and uh sarah if there are any questions from the audience online please do let us know um it's a question for sarah um thank you very much to everyone um very clear from everyone but i was just getting excited as you were giving your introduction to the situation where you've got the transfer from one medium to another so you've gone from either paper into electronic or vice versa in the situation with the clubs they they legislate within the rules as to how that operates so i've got a um a question which is asking for confirmation because you did allude to that and i think you did say the answer but i'm going to ask you to verify that and then i've got a question which follows from that if i haven't lost you already um the the the confirmation is i think you said that the draft bill is going to um include in the legislation how you do change from one medium to another is that right no no not how so we don't set out um certainly when it left the law commission we don't have how that happens we just say if there is a change of medium that doesn't negate the effect of the provisions for the purposes of the electronic form but we don't know how it happens in any so we've left as much as possible apart from the sort of um the kind of headline principle if you like we've left the practicalities of that that need to be satisfied for the change of media to be valid right okay and so the second one is so say you've got a um a situation where you've got an electronic bill and you you convert that so the parties agree that they're going to create a a physical bill of lading as i understand in some of the rules they will say historically this has been a an electronic bill and this is now become a paper bill and so they refer back to the original shipper which might be about three stages beforehand and they record that fact um i haven't quite grasped and that's my fault and i haven't read the bill but if possession is not the key for how you own for want of a better word an electronic bill in a situation where you dove do have a transfer from one medium to another is it then just left to the current legislation for example say you you you take possession of a physical bill which used to be an electronic bill in another life that you you do in those circumstances you do revert to the current situation which is possession is the key for um ownership or you know the legal right and entitlement to the goods which are represented by that bill so that that just falls into place with the current legislation is that how it operates yes in the current situation but i should um so yes in in answer to that part of your question that's absolutely right but i should um emphasize or correct maybe an impression i gave before which is that actually what we are saying here is that possession is key for electronic trade documents you know it remains um the central issue and that fits with yash's point about how courts can then just lock into or key into rather i should say all their historical development of concepts in relation to possession so what we're saying is simply possession is still important because that's how these things transfer and divest and so on but that actually there's nothing about an electronic trade document that ticks our boxes characteristics independence divestability immune ability to exclude possession which prevents them being possessed so possession is still absolutely key it's tangibility which is no longer um the touchstone so there's the two parts of that answer i don't know if you wanted to add anything since you were yeah it's it's just um if you look at clause 3 of the bill this is this it says very simply this that's an electronic trade document can be possessed indoors and uh you can pass with possession uh uh objects so so this was the whole idea of setting out the criteria these are the criteria that need to be satisfied before an electronic document is deemed possessible and once it's deemed accessible then it can be an electronic trade document and function exactly like its paper counterpart is the reason behind the the legislation providing for convertibility back to paper because i assume that would be when you're talking about convertibility that in most cases that means yeah from electronic back to paper in order to just give scope to these digital platforms so that to help them deal with the the local the local law issue exactly so it's to bridge the gap between where we are now and where we want to be and where are the just or other jurisdictions catching up so it's really a sort of filler until we don't have to do this anymore and you know in the the sort of utopian future where everything's electronic that this that this isn't an issue anymore so yes i mean the the conversion back to paper would then just revert to the original position in terms of because what we've tried to do is just achieve equivalence and you know that's just sort of feels like such a should be such a simple thing to do but in drafting terms wasn't really because we had to work out of course all these details but essentially that's what we were trying to do so when it's electronic this is what possessability looks like you can still use transfer and dispose of it in the same way as you would with a paper document and it goes back to non-electronic you don't need this bill yeah exactly yeah thank you but i mean i think that convertibility raises a lot of practical questions bills at the moment so that's where one of the parties to the bill of lading wants to change it um because say they're gonna put a different consignee on it they've sold it to a different party or something like that and the agents get into lots of trouble when they start changing them and we have to always say to them no you need to get in all the original bills first and then once you've got them then you can issue the second set and this sounds like it'll be a similar type of thing but you'll have to get in at the electronic versions however that will work having the key etcetera and then dissolve them or however it works yeah take them out of circulation and then provide the paper version which may be just an exact copy of it because you need a paper version or it could be a different version depending on what they need i think there's platforms like the lme for example but i mean they have that already right where they have the paper they have an electronic warrant but they also somewhere in the system there's a piece of paper so in the example you gave earlier for if if that financing bank has the bill of lady and the the vessel is diverted the goods are diverted to a different port of discharge from the one agreed then the bank would presumably have to ask for a conversion to paper at that point to make sure that they've still got their security because this piece of paper is recognized pretty much across the world as giving them possession of the goods and giving them a security right over the goods but the electronic trade document is not necessarily recognized across the world as doing that so so this is what they would have to do to protect their their you know special property rights in the goods yes absolutely so like a lot of banks would take security by way of a possessory pledge in the context of saying commodities or physical goods and the reason that works is because every jurisdiction in the world pretty much recognizes that if you have the physical possession of a physical bit of paper that's the bit of lady that gives you constructive possession of the cargo because because the ship's master will release the cargo to the holder of the the original bill of lading and that that's what gets you constructive possession and that satisfies the relevant local security law requirement to have to have a possessive pledge all of that goes out the window if if the local laws don't recognize electronic bills of lading as giving you constructive position so yes i mean i think you would if you then had a system that you know it was all electronic until you had a default or dispute and then you just print the bill of lading out and hey presto problem solved i don't think it's going to be that straightforward because i think if you ended up in a in a local court and your counterparty wanted to make trouble they would be raising arguments around the validity of that process which which would be a new thing that the court had probably not seen before um so interesting times ahead any other questions yes uh question two yes probably we know uh or am i right to assume that the push to for for electronic bills of lading uh comes probably from commerce from the sellers and bias of commodities but what about the uh position of the carrier and shall i say the the tonnage owners because it doesn't matter how many links are down the chartering chain more often than not the the bill of lading is owner's bill of lading so so our electronic post-inflating uh welcome for welcome news for for supreme so no i mean i i'm not trying the best person in place to say how how ship owners feel about it but um i would have thought i mean they are they're they're they're remarkably new dawn they are the concerns that have been flagged or essentially it does the ship of the ship owner faces the concern of ending up in a port where potentially electronic trade documents electronic bills of lading aren't recognized i mean i i think i mean i think we start with the start of a process where um unless enough of industry gets behind it and steps in to start supporting it it ends up being a bit a bit like sort of chicken and egg situation in that you don't end up getting enough critical mass behind it and you don't end up with enough foreign jurisdictions then thinking there's any point in deciding to adopt legislation that starts harmonizing position so um i i mean for my part i think uh i think shipowners should get behind what i hope is the new legislation i think there's an electronic deflating clause drafted by bimko which uh basically protects the shipowner if the charterer insists on it on an electronic bill of lading so i think there's an an indemnity built into it i haven't looked at it for a while and i think they have come up they are coming up with a new version if i'm not mistaken uh but i i yeah i'm pretty sure there's protections built in there obviously the container industry is very very keen uh in container shipping they're very keen on electronic bills of lading because obviously it's very high volumes and and issuing all that paper documentation is is expensive it's an expensive and time consuming process um anyone else um hello um my name is alan mckinnon and i work for the uk pnr club i also have the joy of chairing the bills of leading subcommittee and we look at electronic bills and and um you're kind enough to point out that we've approved seven systems and we've been doing it for quite a long time um but and this i think is sort of bringing out um some of the comments before it's just not happening you know we're not seeing bills of lading being used uh electronically in a mass way um there's there's all sorts of things to recommend it and i'm just wondering you know is this bill the answer or what what else is is going to um to sort of make this sea change and get everyone using electronic bills because we can see the huge advantages for ship owners for traders for everyone involved in the in the process yeah well well obviously i think it's the answer um i just um i mean really just to go back i mean obviously i i don't know and i'm very hopeful that that this is that this will be the beginning as justice of a process and what i have certainly picked up from talking to the huge range of organizations that that i have spoken to is that sense of anticipation that there needs to be just some sort of catalyst because there is the demand and and most people as you say recognize the benefits but there is still the fear i think of unfamiliar risks as well so obviously there are new sets of risks that come with electronic documentation that doesn't mean that in aggregate they're any greater than they are with paper documentation personally i think they're lesser but they are unfamiliar and of course that does mean that um they are scarier i think to to some organizations but i think it's also in a practical sense talking to the technology platforms as i said it's about should we invest these resources yet and should we do the necessary marketing and encouragement if we don't know that it's going to be legally valid so yeah i'm hoping this is a it is this is a catalyst but i wish i wish i could say something more different i don't know well i think it's a simple question of when it'll happen when the advantages outweigh the disadvantages and when you get to that tipping point and i think the new legislation really lowers the threshold that you have to get over because it solves the problems that historically been held back i mean that's the point i was making before i think we at hsw think that you know our view is that the market can start even with a relatively small number of jurisdictions and obviously electronic bills are made in the war already being used to some extent but but you can see that you know you could see that increasing because there will be at least some major jurisdictions that now recognise them and there seems to be for the first time a real path through to the market taking it up yeah i think it's fair to say that this kind of reform does lower legal risk uh and and hopefully as you say it will become more and more widespread um uh so any any other questions oh yes there are it's john bryan herrera shipping as a consequence of the current situation with regard to paper and the future expectation from an electronic point of view where would the role and requirement for letters of indemnity set and what are the risks associated with a system which whilst it appears to be closed may well be subject to various attempts to corrupt it um in terms of what we see now in the banking world and even on the personal level for hacking and things like that very very good questions i'm not sure well qualified to answer them so i mean there are there there are certain markets like oil trading for example where um the cargos get get bought and sold very very often during the voyage and there's not enough time for the physical paper bill of lagging to be handed from seller to buyers to buyer and so people get around that by instead and then traders are willing to trade the cargo based on the banks of condemning instead of getting their hands on the actual original nobody knows where they are please accept this away as a consequence of that it's it's quite um important that pre-agreements to lois in in child party contracts are to be frowned and refrained from simply because of p9 um would would if they decided they didn't like the consequences or the terms that are being suspected to have been agreed would amount to some form of either corruption or fraud um they would have the right to withhold cover and for shipping that's very damaging and also for a cargo owner as well right so these questions um i'm not sure are readily transferable if there's a transfer back from or to a physical versus an electronic it has to go through the banking system at one point another right well i think in simple terms our view would be if you if you go fully digital you don't need otherwise yeah because the only the only reason really to have a letter why is the physical paper bill of lading can't get around the world fast enough but an electronic bit of ladies and singers yeah um so at least at least for some some transactions and structures so it's the answer to all our problems i mean i i think even though it looks like the the philosophy is to try and keep us close to the way paper documents work i think it does change i think moving to electronic does change the risk profile for example you don't need lois anymore there's a difference there that flows from that okay in in terms of the traditional as it has been for a long long time um right of the master to retain one of them on board and the remainings have been used to transfer or transact through the system et cetera et cetera would the master have access to whatever the contractual content of an electronic bill of lading to let's say be in charge of that as well to see what's going on because he's he's actually carrying the cannon isn't he's carrying the car and he's responsible for that car to be delivered safely well i don't know the answer to that but i imagined you know the philosophy would try and stick as close to the paper or at least initially just as close as possible to the paper situation and the way rights and responsibilities are a portion between the different parties doing a transaction you try and keep as close to that as possible and achieve that in that right way yeah um then maybe once it's more established that that might change over time i mean what we what we can say is that distributed ledger technology has the ability the functionality to give all stakeholders access to the same um you know reliable information authentic information at the same time and real-time information so if if the system were set up in that way if all the parties agreed that they were happy for the system to be set up in that way um there could certainly be transparency for the person carrying the can you know the person who has to decide who to deliver to so so they they would be able to check the records and see who's actually got this thing at this point in time as you say i think the greatest the greatest sort of obstacle to that is needing to switch to paper which we anticipate that for a while that will remain something that needs to happen um uh but hopefully you know that the rest of the world won't won't take too long to get on board um uh hopefully not yeah um i i think your your question about the hacking and vulnerability is also really interesting as far as dlt system systems are concerned they are very very resilient they are very resistant to hacking because um encryption cryptography is used at the at the level of every single message so every single message is hashed and then each hash points to the previous hash so you've got so many levels of security to hack through before you can change any of this information and and this makes it computationally infeasible to actually you know fiddle around with with the information and the bill there are some very small acts there are there are and and quantum computing does thus uh um make it more vulnerable but uh hopefully we'll get quantum cryptography at the same time so um were there any other questions uh sarah right so i think um we have carried on a little beyond uh seven o'clock um so i will uh i will bring this to a close now and i would just ask you to thank our panelists and the usual you