In terms of commercial maritime law, it is well recognized that a bill of lading is a
chose in action underlying which is a chose in possession representing the cargo.
4
The carrier who has the physical possession of the goods promises to deliver only to
the holder of the bill of lading. That means that possession of the bill of lading
generates exclusive control over the goods, namely, constructive possession of the
goods.
5 Thus, being “a symbolic key to the warehouse”,
6 possession of a bill of
lading is tantamount to possession of the cargo itself. Transfer of the bill of lading
therefore equals constructive delivery of the goods. The transfer of the paper bill of
lading through the process of endorsement, which is an assignment of the rights
prevailing in the bill of lading, is the instrumentality through which title to the goods
is transferred even today. Even though the electronic bill of lading was devised
decades ago to improve the efficiency of the paper bill, it failed to replicate its
function as an instrument representing the possession of goods until the advent of the
blockchain technology and its application to smart contracts.
The basic concept of the new blockchain technology, also known as distributed
ledger technology (DLT), is that it is a decentralized system analogous to a ledger in
which transactions are recorded. The ledger or blockchain consists of blocks that are
connected to each other as transactions occur. It is maintained simultaneously across
a network of computers or servers. These are referred to as nodes. The blockchain is
a continuous and complete record of all transactions that are grouped together into
blocks comprising the chain. A new block is added if the parties in a blockchain
network agree on the new transaction. It can be only verified if all nodes on the
network confirm its validity. One usefulness of the blockchain is that being a selfmaintained database akin to an operating system, “smart contracts” can be written
into it. Information regarding the transactions can be stored automatically and traced
without the intervention of an intermediary entity such as a financial institution or a
centralized authority or a third party. Only members who are specifically authorized
can have access to the blockchain and are known within the network.
7
The connection between blockchain and bills of lading as envisaged in the present
work is that the blockchain concept can resolve problems of efficiency arising with
respect to paper bills and also those relating to transfer of title that arise in other
forms of electronic bills of lading. However, the blockchain bill of lading as a smart
contract is less than perfect given its own legal deficiencies.
4 Dromgoole and Baatz (1998), p. 549.
5 Ibid.
6 Sanders v. Maclean (1883), 11 QBD 327, at p.341 where Bowen L.J. described a bill of lading as
“a key which in the hands of a rightful owner is intended to unlock the door of the warehouse,
floating or fixed, in which the goods may chance to be”.
7 McKinlay et al. (2018).
Blockchain and Bills of Lading: Legal Issues in Perspective
415
chose in action underlying which is a chose in possession representing the cargo.
4
The carrier who has the physical possession of the goods promises to deliver only to
the holder of the bill of lading. That means that possession of the bill of lading
generates exclusive control over the goods, namely, constructive possession of the
goods.
5 Thus, being “a symbolic key to the warehouse”,
6 possession of a bill of
lading is tantamount to possession of the cargo itself. Transfer of the bill of lading
therefore equals constructive delivery of the goods. The transfer of the paper bill of
lading through the process of endorsement, which is an assignment of the rights
prevailing in the bill of lading, is the instrumentality through which title to the goods
is transferred even today. Even though the electronic bill of lading was devised
decades ago to improve the efficiency of the paper bill, it failed to replicate its
function as an instrument representing the possession of goods until the advent of the
blockchain technology and its application to smart contracts.
The basic concept of the new blockchain technology, also known as distributed
ledger technology (DLT), is that it is a decentralized system analogous to a ledger in
which transactions are recorded. The ledger or blockchain consists of blocks that are
connected to each other as transactions occur. It is maintained simultaneously across
a network of computers or servers. These are referred to as nodes. The blockchain is
a continuous and complete record of all transactions that are grouped together into
blocks comprising the chain. A new block is added if the parties in a blockchain
network agree on the new transaction. It can be only verified if all nodes on the
network confirm its validity. One usefulness of the blockchain is that being a selfmaintained database akin to an operating system, “smart contracts” can be written
into it. Information regarding the transactions can be stored automatically and traced
without the intervention of an intermediary entity such as a financial institution or a
centralized authority or a third party. Only members who are specifically authorized
can have access to the blockchain and are known within the network.
7
The connection between blockchain and bills of lading as envisaged in the present
work is that the blockchain concept can resolve problems of efficiency arising with
respect to paper bills and also those relating to transfer of title that arise in other
forms of electronic bills of lading. However, the blockchain bill of lading as a smart
contract is less than perfect given its own legal deficiencies.
4 Dromgoole and Baatz (1998), p. 549.
5 Ibid.
6 Sanders v. Maclean (1883), 11 QBD 327, at p.341 where Bowen L.J. described a bill of lading as
“a key which in the hands of a rightful owner is intended to unlock the door of the warehouse,
floating or fixed, in which the goods may chance to be”.
7 McKinlay et al. (2018).
Blockchain and Bills of Lading: Legal Issues in Perspective
415