by: Erik Muthow
Research dissertation presented in part fulfilment of the requirements for the degree of Master of Laws, University of Cape Town, 1997 (in approved courses with a minor dissertation)
Note: Because of the document's length, it has been divided into TWO PARTS. This is PART 2.
|TOPICS COVERED IN THIS DISSERTATION|
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7. EDI INTERCHANGE AGREEMENTS
Parties wishing to trade via EDI often find themselves in a legal vacuum. Existing legal norms are ill-equipped to deal with the new legal challenges that EDI provides. Many of the potential legal (and technical) problems can be avoided by the drafting of a proper interchange agreement to regulate the electronic exchange of messages. This is particularly important in light of the fact that EDI does not only entail the electronic transfer of information. In certain instances EDI will create legal rights and obligations, e.g. the transfer (or issue) of a bill of lading will provide the holder with a right of title. It is important to place the contractual relationship on a firm legal footing.122
There are basically two types of interchange agreements, each with its own advantages and disadvantages, namely bilateral and multilateral agreements.123 Although bilateral agreements can be drawn up to suit the specific needs of the parties concerned they could prove unsuitable in an environment where a large number of EDI users operate. The reason for this is that the consent of all the parties would have to be obtained before any changes to the interchange agreement is introduced. It seems therefore more likely that parties would prefer to draw up a multilateral interchange agreement.124 Another option would be to adopt model international interchange agreements. This would have the benefit of providing legal security.
The interchange agreement will have to deal with the legal aspects surrounding trade via EDI. The other technical and security issues would also be dealt with in the interchange agreement but for present purposes attention will be focused on the legal aspects. Suffice to say that the technical aspects would include the standards to be used, necessary backup procedures, communication protocols and the hardware and software needed to maintain a reliable system.
7.1. LEGAL ASPECTS REGULATED IN INTERCHANGE AGREEMENTS
Under the banner of freedom of contract the parties would be able to agree on a number of legal issues. However, it is clear that parties would not be able to create their own law - The matters regulated in the interchange agreement must therefore not be in conflict with the law of the chosen forum. If such a conflict arises the statutory provisions pertaining to that particular matter will prevail.
The purpose and function of the interchange agreements (in the context of EDI) is to place an obligation on the trading partners to make use of EDI and then regulate the aspects underlying that agreement. The interchange agreement would therefore regulate the manner in which the underlying agreement (for example the contract of sale or contract of carriage) is executed.
Interchange agreements would typically include a provision dealing with the legal conclusion of an agreement. It has been argued that it is doubtful whether such an agreement would be valid if it does not meet the legal requirement regarding the form of the agreement, e.g. when the applicable law requires the agreement to be in a written form.125 It would also be prudent to regulate in the interchange agreement when and where the obligations arising out of the agreement are concluded. This would avoid unnecessary conflict of laws. In the absence of such a provision it would be left to the courts to decide the applicable law according to the private international law of the particular forum.
Perhaps the most important provision in the interchange agreement will be the apportionment of liability. Various questions arise: Who would be liable for a system-breakdown? Who is liable for the transmission of incorrect data? The list is endless. The interchange agreement would regulate the liability to a great extent. Typically. an interchange agreement would contain a clause exempting a party of liability in the event of 'force majeur'. Some of these agreements have listed what constitutes 'force majeur'.126 The requirement pertaining to the admissibility of EDI evidence has been dealt with earlier in this paper.127 Provision would also have to be made to determine the operational time-frame of the agreement and the date of termination.
Lastly, it might be worthwhile for parties to include an arbitration clause in their interchange agreement. This would provide for parties to refer any disputes which might arise to a suitably qualified arbitrator. This might be a cost-effective way of resolving disputes since litigation is generally expensive and time consuming.
7.2. INTERCHANGE AGREEMENTS AND THE BILL OF LADING
Would the parties be able to regulate the form and content of the bill of lading in an interchange agreement? As a general rule contracts are valid even though the formalities have not been complied with.128 In some instances the law requires certain types of contracts to be signed and in writing. In these circumstances the validity of the contract will depend on compliance with the formalities. Bills of lading are one such example where the law requires the document to be in writing, either implicitly or expressly. It would therefore be impossible for parties to incorporate into their agreement any provision attempting to by-pass statutory legislation. Such a bill of lading would simply not be enforceable under a forum where the statutory requirements have not been met. The interchange agreement can consequently not displace the substantive law governing bills of lading.
It remains to be seen how courts will interpret the provisions of the various domestic and international interchange agreements. It must however be noted that the courts in general seem to adopt a more liberal approach to the writing requirement.129
7.3. COMPARATIVE INTERCHANGE AGREEMENTS
In order to understand the implication of interchange agreements it is important to have a frame of reference as to how these agreements function in practice. What follows is therefore a brief introduction to the development of interchange agreements in South Africa and Germany.
7.3.1. South Africa
Up to 1995 the development of EDI was largely in the hands of a non-governmental organisation called SITPROSA (Organisation for the Simplification of International Trade Procedures in South Africa). Since then the standardisation function was transferred from SITPROSA to the South African Bureau of Standards (SABS).130 The legal working group of the SABS has since then drafted a model interchange agreement. This final draft has been accepted in September 1995. It governs any electronic transfer of messages between parties. It also makes provision for potential conflict arising between the interchange agreement and any commercial agreement between the parties. Section 1.1.2. provides that the interchange agreement shall have priority should such a conflict arise.
The draft deals with several provisions, including the communications and operations 131, message processing, validity and enforceability. The draft provides that:
The parties shall agree that valid and envorceable obligations shall be created by the communication of messages in compliance with this agreement ...132
Furthermore, the parties would saive any right to object to the validity of the transaction if the only ground for the objection would be that the communication occurred through EDI. It also exempts parties from liability in the event of force majeur. Parties would also not be liable for any "special, consequential, indirect or exemplary damages arising from breach of [the interchange] agreement." 133
The draft interchange agreement also places an obligation on parties to comply with any legal requirement pertaining to the transmission of the message. This is certainly a step in the right direction and it remains to be seen of business adopts these agreements.
German trading partners can choose between the Ge4rman Basic Electronic Data Interchange Agreement (hereafter referred to as the German EDI Agreement) and the European Model EDI Agreement to provide a contractual framework for the trading transactions.134 For the purposes of this paper only a few relevant provisions of the German EDI Agreement will be examined.
As regards the conclusion of the contract the German EDI Agreement provides that a message shall be regarded as received only upon automatic confirmation of receipt by the sender's communications equipment.135 This means that the message will have no legal effect prior to the confirmation.136 This is the position regarding a message sent to the information system of the recipient (data transmission). Where the message is retrieved from the sender's information system (data retrieval) the position is different. In this case the message is regarded as received if it has been made available for retrieval.137
A comprehensive liability framework is provided by the German EDI Agreement. A Liability framework which is not based on fault is provided in Article 14. Article 14(1) reads:
Each party is liable for any damage arising from errors or disruptions within the parties sphere of responsibility... 138
The legal aspects are therefore covered fairly comprehensively in the German EDI Agreement. This is especially true regarding the critical area of determining, and dealing with, the potential liability issues arising out of any EDI.
8. EDI MODEL RULES
In order for EDI to function effectively in an international trading environment, it will have to be incorporated into an acceptable legal framework. Model rules have been promulgated by several international organisations as a result of the growing interest in EDI.139 Model rules make EDI messages legally binding on the parties. This can be done either by:
8.1.CMI RULES FOR ELECTRONIC BILLS OF LADING
It is against this background that the CMI rules for Electronic Bills of Lading have to be examined. These rules were adopted in Paris in June 1990 by the CMI.140 It is furthermore important to note that the CMI rules are voluntary by nature. The result is that the parties have to agree to the rules, upon which they will then be incorporated into the contract of carriage. Rule 1 reads:
These rules shall apply whenever the parties so agree.
If the parties decide to convert the CMI bill of lading to a paper bill of lading the Private Key becomes null and void. 141 This situation might arise in a number of instances, for example where the new holder does not possess the electronic equipment to receive an electronic bill of lading. The CMI rules have anticipated this and provide for a sensible alternative.
8.1.1. Main Features
The main feature of the CMI rules is the creation of an electronic bill of lading. These rules are therefore not intended to govern the handling of EDI in general, and bills of lading in particular, on a comprehensive basis.142 This is evidenced by the fact that the rules are not intended to displace the substantive law applicable to bills of lading. In the vast majority of cases the Hague or Hague-Visby rules will govern bills of lading. Rule 6 clearly states that:
The Contract of Carriage shall be subject to any international convention or national law which would have been compulsorily applicable if a paper bill of lading had been issued.
However, they arguably will have a significant impact on the manner in which EDI is implemented internationally.
8.1.2. Creation of the Electronic Bill of Lading under the CMI
The shipper will deliver the goods intended for shipment to the carrier. Rule 4 then stipulates that the carrier shall give notice of the receipt of the goods to the shipper. This is done via a message posted to the electronic address of the shipper. The "receipt message" has to meet certain formal requirements which are listed in Rule 4(b). Essentially these are the same requirements as contained in a traditional paper bill of lading, and include:
In terms of Rule 49(d) the receipt message "shall have the same force and effect as if the receipt message were contained in a paper bill of lading." The implication is that the receipt message is equivalent to a paper bill of lading. After receiving the receipt message the shipper (or whoever the recipient may be) has to confirm receipt of the message to the carrier.143 Traditionally, the holder of the paper bill of lading acquires title to the goods and is entitled to endorse the bill of lading to a 3rd party and thereby transfer ownership of the goods. The CMI Rules make endorsement and registration possible by means of a "Private Key".
The Private Key is defined in Rule 2 as "...any technically appropriate form ... which the parties may agree for securing the authenticity and integrity of a Transmission". This approach leaves the door open for future technological advances which may have an impact on the coding and de-coding of electronic data. The holder of the Private Key can therefore claim delivery of the goods, transfer his Right of Control to another party and nominate or substitute the nominated consignee.144 The holder of the Private Key would find himself in exactly the same position had he been issued with a paper bill of lading.
Whenever the holder of the Private Key, being the de facto holder of the paper bill of lading, wants to transfer ownership of the bill of lading to a new holder, he would have to notify the carrier of his intent.145 The Private Key (which is unique to each holder) is used to authenticate the electronic transmission. However it would still be necessary to use other methods of security to ensure that the transmission is private.146 The carrier subsequently has to confirm receipt of the message and will then transmit the receipt message data to the new owner. The Private Key will be withheld from the new owner pending his acceptance of the transfer. Only after the new holder has transmitted his acceptance of the transfer of ownership will a new Private Key be issued by the carrier.147 The 'old' Private Key is then cancelled. The carrier acts as the registry and this could clearly cause problems which will be alluded to shortly.
Delivery is effected by production of proper identification to the carrier.148 It is therefore not necessary to present the carrier with the original bill of lading in order to take delivery of the goods.
In an effort to prevent the legal obstacles which are bound to arise under various national laws regarding the requirement that the document has to be 'in writing', Rule 11 was introduced. It states that the parties agree that any national law or practice which requires the contract of carriage to be evidenced in writing is satisfied by the transmitted and confirmed electronic data. Furthermore, the parties agree not to raise the defence that the contract was not in writing. It is doubtful whether this removes all the legal obstacles.
8.1.3 Areas of Concern
==> Can the Private Key procedure function as a legal negotiable bill of lading? By accepting the receipt message the buyer obtains rights which (should be) legally enforceable. However, this presupposes that the receipt message was authentic and therefore genuine.149 If the transferee accepts a receipt message which is fraudulent, real problems arise. Kozolchyk maintains that these problems cannot be overcome by a stipulation that the Private Key and the receipt message are the equivalent of a paper negotiable bill of lading. Furthermore the general rule seems to be that the creation of negotiable documents of title is the prerogative of statutory law.150
==> Problems may also arise due to the fact that the carrier acts as the private registry. This places a heavy responsibility on the carrier. The carrier would be privy to each transfer. There is no stipulation in the Rules which governs the liability that accompanies this responsibility.151 It seems unlikely that the carrier would be willing to expose itself to potential liability which is not clearly regulated and defined.
The converse is also true. All the other parties are dependant on the goodwill of the carrier to effect delivery of the Private Key.152 The privacy of transfers would be compromised and it remains to be seen if parties would be willing to reveal their identity. However, this problem could easily be overcome by the use of 'front companies' or agents.
==> Jurisdictional questions might also arise due to the fact that the Rules do not stipulate when and where the bill of lading is issued. The rules of Private International Law would come into play at this point to determine where the contract was entered into.
==> The banking community in particular is concerned about the apparent lack of security attributed to the Private Key system. It is difficult to visualise an effective security system when so many parties are involved in the transaction. A possible suggestion to remedy the lack of security is to ensure that each private key password should be used as an integral part of the encryption algorithm.153 This would effectively mean that an erroneous transmission is clearly evident since it would not be readable by the recipient.
==> The CMI rules do not make provision for the authentication of electronic bills of lading. It has been suggested that a public key system should be adopted to authenticate the electronic signature.154.
The CMI rules establish a good procedural basis for the use of EDI in bills of lading. As was mentioned earlier, these rules are not intended to replace substantive law, but merely to provide a framework for EDI in the international use of bills of lading.
Parties often develop their own underlying agreements to govern sales contracts which are conducted by electronic means. This is especially important, given the fact that international law has not kept pace with electronic developments and accordingly does not regulate such trade satisfactorily. It is with this in mind that the International Chamber of Commerce (ICC) produced uniform rules of conduct for interchange of trade data by telegransmission. The UNCID rules were developed in conjunction with several international trade bodies, including UNCITRAL.155 These rules are intended to regulate the conduct of parties making use of EDI or other electronic information exchange.
Furthermore, the UNCID rules would also govern the conduct of parties making use of the CMI rules. This will only be the case where the UNCID rules are not in conflict with the CMI rules.156 The UNCID rules do not have the force of law but only come into operation if the parties contractually agree to them. The rules impose a duty of care on the parties to ensure correct and secure transfer of electronic information.157 Regarding the conduct of the parties relying on the transfer of electronic bills of lading, it suffices to say that UNCID will or should have a significant impact on the manner in which these transactions are performed. It would be prudent for parties involved in these transactions to adhere to these rules in order to avoid conflict and to promote uniformity.
The ICC's Incoterms are intended to define the rights of parties under international sales contracts. It has been stated that "trade terms are indispensable for the implementation of the contract".158 Parties contractually agree to adnere to the Incoterms and express reference to these terms has to be made in the contract of sale before they become binding. The ICC has seen the need to reflect the growing use of EDI in modernised rules of interpretation.159 The Incoterms 1990 provide for the validity of electronic messages. Articles 8A and 8B provide:
Where the seller and the buyer have agreed to communicate electronically, the [usual document] may be replaced by an equivalent electronic data interchange agreement.
The parties would therefore have to agree to use electronic messages as a replacement of the usual transport documents which would include the traditional paper bill of lading.160
8.4 OTHER EDI MODEL RULES
A number of other Model Rules have also been promulgated by various bodies. For present purposes these rules need not be dealt with but are simply listed in the interest of presenting a complete picture.161
The United Nations Commission on International Trade Law (UNCITRAL) has prepared a Model Law on Electronic Commerce.162 This Model Law can be adopted into legislation by the various jurisdictions attempting to implement EDI legislation. The Model Law would also provide a useful framework for countries seeking a framework from which to draft their own legislation. It is beyond the scope of this paper to examine in any great detail the various provisions of the Model Law. However, some of the provisions will have implications for electronic commerce dealing with the carriage of goods by sea. These provisions will therefore be examined briefly.
Article 1 defines the scope of application and reads:
This law applies to any kind of information in the form of a data message used in the context of commercial activities.
It was suggested that the term 'commercial' should be given a wide interpretation. The bill of lading would also be included in the scope of this definition.
Another important provision is found in Article 5, which concerns the legal recognition of data messages. It ensures that legal effect is not denied to information solely on the grounds that it is in the form of a data message. The legal recognition of the validity and enforcement of the information is also ensured under this article. Article 5 reads:
Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message.
However, parties would still need to comply with the relevant statutory provisions regarding the particular documentation used.
Article 16 deasl specifically with actions related to the contracts of carriage of goods. It includes:
The holder of the bill of lading can claim delivery of the goods. The bill of lading is clearly included under the provisions of Article 16. Article 17 provides that:
...where the law requires that any action referred to in Article 16 be carried out in wriging or by using a paper document, that requirement is met if the action is carried out by using one or more data messages.
However, this article is subject to paragraph (3), which provides that the legal requirement for the transfer of a right or obligation (the use of a paper document) is met if this right is conveyed by a data message. These provisions aim to give legal recognition to electronic transport documents. Article 17(6) ensures that compulsory applicable rules shall still apply, even though electronic data messages are used. It reads:
If a rule of law is compulsorily applicable to a contract of carriage of goods which is in, or evidenced by, a paper document that rule shall not be inapplicable to such a contract of carriage ... by reason of the fact that the contract is evidenced by such data message or messages instead of a paper document.
The UNCITRAL Model Law therefore aims to create a legal framework and promote uniformity for the operation of EDI.
10. THE FUTURE
Negotiable electronic bills of lading have not yet been implemented on a large scale. However, there have been a number of experiments in substituting the traditional paper bill of lading with an EDI system, noticeably SeaDocs and Bolero.
This experiment in electronically negotiating bills of lading lasted less than one year. However, it can be seen as the first serious attempts to introduce an electronic bill of lading.
Chase Manhattan Bank and Intertanko (an association of independent oil tanker operators) joined forces in creating SeaDocs Registry Limited. SeaDocs was a London-based Delaware Corporation which was created to facilitate the need experienced by the oil trade to transfer the right to obtain delivery of the crude oil. Oil or petroleum cargo is often sold en route and conventional documentation would be too slow to supply each buyer with an original bill of lading.163 It therefore became necessary to look at other substitutes for the traditional paper bill of lading. SeaDocs worked as follows:164
An original paper bill of lading was issued by the carrier. This bill of lading was then deposited with SeaDocs. SeaDocs acted as the depository-custodian of the original paper bill of lading. In addtion to this function, SeaDocs was therefore the agent for all the parties involved in the shipping transaction -- this included authority to endorse the bill of lading (therefore acting as agent for both the endorser and the endorsee) and to deliver the paper-based bill of lading to the consignee or party who would eventually claim delivery of the cargo. The procedure was developed to effectuate transfer of ownership during transit.
Once the original paper bill of lading was delivered to SeaDocs and it its safekeeping, a test key or code was delivered to the shipper. The shipper had to notify SeaDocs electronically when he wanted to negotiate the bill of lading. The shipper would then provide the endorsee/buyer with a portion of the test key. SeaDocs had to test the message of the shipper to ensure it was authentic before acting on it. In addition to the shipper notifying SeaDocs of his intent to transfer, the endorsee/buyer would also notify SeaDocs of his acceptance of the transfer. SeaDocs would then verify the message of the endorsee/buyer against the portion of the test key. These checks were intended to ensure that the correct messages and instructions had been received.
SeaDocs would record the name of the endorsee/buyer in the registry as the new owner only after all the messages had been checked. Upon arrival of the goods at the port of destination, SeaDocs would transmit an identifying code number to the carrier (in practice this code was transmitted to the ship's master) as well as to the last endorsee of the original bill of lading. The endorsee, who would then be the owner of the goods, was entitled to delivery by means of this code.
As was mentioned earlier, SeaDocs did not survive for longer than a year. This was despite the fact that no serious operational difficulties were experienced. Kozolchyk 165 gives the following reasons for the failure of the SeaDocs experiment:
Although this system has not survived, it nevertheless proved that an electronic bill of lading system could work in practice. However, it demonstrated another valuable lesson -- unless the trading partners and the business community in general accept and make use of a particular system, it will not survive. The bottom line here is not so much legal concerns but practical ones. Will the system benefit us? Will it make our business more effective, that is to say, reduce costs and save time? Only if these questions are answered in the affirmative will full-scale implementation of EDI be possible.
Bolero is a joint project, funded by the European Community, aimed at the use of electronic bills of lading.166 The ultimate aim is to create a fully electronic environment which offers an alternative to the documents in use for international trade. The system uses a series of EDIFACT standard international messages, a central register and security system to pass electronic title. The security system is based on digital signatures. A certification authority will issue electronic signatures to the members of the project.167 The central registry will be a trusted third party, for example a telecommunications company or bank.
The agreement to use electronic communication is incorporated into a set of rules which will bind all the members. These messages are based on the CMI Rules for electronic bills of lading.168 The carrier will then electronically receive the instructions from the shipper. He will then turn this into a Bolero bill of lading (BBL) and send it back to the shipper after digitally signing the message. A record for the BBL is then created by the registry who will create a unique consignment reference number to the BBL. Upon acceptance of the BBL the shipper becomes the first record holder of the BBL. Paper documentation is not required and the entire process is conducted electronically.
If the holder of the BBL wishes to transfer the electronic document to a third party he will initially send a transfer request to the third party. If the third party accepts the transfer he becomes the new holder of the BBL. The key has to be authenticated by the registry. All the parties who receive messages receive from the registry the public key necessary to decrypt the message in order to ascertain the source of the message. Once again, this method is aimed at ensuring that the authorised parties receive the correct messages.
Problems might arise under a BBL in respect of title to sue. In the United Kingdom section 2(1) of the 1992 COGSA gives the lawful holder of the bill of lading title to sue the carrier. This was necessary because English law does not allow the contractual creation of an instrument (such as a bill of lading) which gives a subsequent holder (i.e. who was not party to the original contract) the right to sue one of the original parties to the contract.169 It would therefore not be possible for the shipper and carrier to enter into an agreement which purports to give the endorsee of the bill of lading the right to sue the carrier. However, it is suggested that this problem can be overcome by the statutory creation of such a right in the 1992 COGSA. Section 1(5) of the Act allows the Secretary of State to provide for the application of statute where information technology is being used.
Bolero has several advantages. It will essentially save time and eliminate much of the paper documentation associated with international trade in general and carriage of goods by sea in particular. This is possible because each data element only needs to be transmitted once, effectively eliminating the duplication of large amounts of paper documentation.
Finally, shipping systems will be integrated with the systems of the other relevant traders, including the manufacturing, order processing and accounting systems. Bolero will be watched closely by the various parties concerned with international trade. Successful implementation and operation of the Bolero system will go a long way towards alleviating fears associated with electronic bills of lading. In many ways Bolero can be seen as a 'testing ground'; for the battle surrounding the implementation of electronic bills of lading.
10.3 EDI AND THE INTERNET
No discussion of EDI could be complete without mentioning the Internet. There has been remarkable growth of Internet users in the last few years. More and more companies are also turning their attention to the Internet. This simple introduction introduction to EDI and the Internet is by no means comprehensive. It is merely intended to focus attention on the possible use of EDI in cyberspace. In an electronic world where technology changes almost daily, it is difficult to keep pace with the latest developments. However, the Internet is here to stay and business would be short-sighted not take advantage of this dynamic medium.
The Internet is not an organisation, but could be described as "the inter-working of existing corporate and government networks using commonly used telecommunications standards.170
What advantages does the Internet offer? These can be briefly summarised as:
Organisations and businesses using the Internet would usually made use of Value Added Networks (VAN). These networks act as third party service providers and typically would provide delivery of the EDI documents as well as support in developing an EDI trading community. However, parties would not have to rely exclusively on VAN since EDI only requires that trading partners follow the content standards (such as EDIFACT).
The problem is that the Internet is not very secure. It would therefore be necessary to take certain measures to provide adequate security and privacy. Some suggested steps would be to obtain passwords, to establish 'firewalls" and implement active countermeasures in the 'firewalls'.172
Another interesting development regarding the use of EDI on the Internet has been the involvement of The Electronic Commerce World Institute in Montreal with EDI. This independent organisation will provide administrative support for the Internet Law and Policy Forum (IPPF).173 The ILPF mission is to
respond and ... accelerate the development of solutions for the challenging legal issues and policy questions arising with the increase of business activity on the [Internet].174
Working groups will analyse these questions. The argument is that the Internet provides a neutral venue to resolve confusing global legal issues. It will be interesting to watch for future developments in this regard. Further information can be obtained from the ILPF homepage. 175
The Internet will clearly expand even more in coming years. However, it is doubtful if international trade will be conducted on a wide scale on the Internet because of the apparent (real and perceived) lack of security. Unless this issue is resolved the Internet will not reach its full potential. There should therefore be come means of encrypting the message in order to secure the transmission. This might mean that trading partners would have to agree to an encryption protocol which would then be part of the trading partner agreement. This works well where the trading partners are known to each other but difficulty might arise where there are multiple users who would not always be known to each other, hence making such an agreement a practical impossibility.
Lastly, it is worth briefly mentioning the issue of e-mail as a substitute for EDI. It has been suggested that there are certain aspects of e-mail which could present a cost-effective alternative to EDI. It would obviously not replace EDI completely. Instead it would be used in conjunction with CGI scripts. In laymen's terms, a CGI script would mean a computer programme that runs on the host computer and with which the client's computer can interact. CGI scripts can be used to provide security, e.g. a password programme would allow only certain authorised users to access the information.
The computer would then process the script and an order would be placed electronically.176 It might certainly provide a viable and cost effective means to transmit documents electronically, especially where the level of security required is not too severe. e-Mail would prove useful where companies seek to establish relationships which in turn might lead to contractual negotiations. Once the transfer of the actual documents is required, the trader might prefer to make use of a more secure network.
10.4 DATA PROTECTION
Data protection also deserves a brief mention since it is imperative that information processing is adequately protected. The United Kingdom has responsed to the growing fears of data manipulation by passing the Data Protection Act of 1984.177 The long title of the Act describes its purpose as:
[regulating] the use of automatically processed information relating to individuals and the provisions of services in respect of such information.
The Act defines what is meant by data, a data user and a data subject. 'Data' is construed widely to include "...information recorded in a form in which it can be processed by equipment operating automatically in response to instructions given for that purpose..." The data user would be a legal person, such as a value-added network service provider, and is not limited to a natural person holding data.
The Data Protection Act sets out certain principles which must not be contravened. These principles include:
Although the Data Protection Act is mainly concerned with the protection of information concerning individuals, it highlights the need for legislation to protect the information contained in documentation. In an EDI context, this means that the carrier (or central registry) who is responsible for the holding of the electronic bill of lading will need to be assured of the liability attached to the storage of the information contained in such documentation, as well as the responsibilities pertaining to such storage.
It is difficult for parties to relinquish a document which has served them well over the years. The bill of lading is one of the most respected documents in international trade. It has been held that:
A bill of lading is a document of dignity, and courts should do everything in their power to preserve its integrity in international law for there, especially, confidence is of the essence.179
However, new technology has brought new challenges and possibilities. Once the remaining technical concerns regarding security and authentication have been resolved, and legal recognition assured, full scale implemention is possible.
Substituting the traditional bill of lading with EDI is still fraught with real (and perceived) problems. Parties wishing to trade with EDI will have to be aware of the potential pitfalls associated with electronic trading. Pending legislative reform, the parties will have to regulate many of the technical and legal requirements in the underlying EDI interchange agreement.
The traditional bill of lading will still have its place in the immediate future. The capital expenses of setting up an EDI network might prove too costly to afford these services to everybody. There is no reason why the electronic bill of lading can't co-exist with the paper bill of lading for the immediate future. The real challenge lies in creating a system in which both traders and the courts feel comfortable. This will require a concerted global effort from all the parties involved. This is certainly a difficult, but by no means impossible, task. The proponents of EDI will have to prove that the electronic bill of lading can function in the real trading environment and, ultimately, that it provides users with a competitive edge.
The electronic bill of lading will undoubtedly become a reality. There are simply too many advantages attached to this form of trading to dismiss the concept. In order for the electronic bill of lading to replace the paper bill of lading, it would essentially have to ffer the same advantages and level of security associated with the paper bill of lading.
The functions of the negotiable paper bill of lading can be duplicated, but the electronic bill of lading would have to go one step further: it would have to improve on the traditional bill of lading. The advantages of the electronic bill of lading have been discussed.180 It is suggested that these advantages will prove sufficient to eventually replace the paper bill of lading and take the bill of lading into the next century.
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