including the applicable law and jurisdiction in respect of the contract. Regarding
charterparties, without express provisions addressing such matters as cargo liens,
demurrage and dispatch, notice of arrival, fuel consumption and speed of the ship,
parties to the contract would be left exposed to numerous potential liabilities.
Furthermore, sellers, buyers, shipowners and charterers usually have their own
standard form contract terms designed for a particular transaction. Whether these
can be retained in a blockchain-based transaction is a legitimate concern. Presumably, the blockchain can be suitably configured to accommodate these and other
matters mentioned above but that has not yet been demonstrably established.
The traditional paper contract is indisputably the basis for a smart contract. That
would include a blockchain bill of lading. Initially, there must be a written paper
contract before a transformation into code form can take place to facilitate the
activation of the smart contract. If a coding error is made in the transformation
process, legal problems are bound to arise. This is associated with the technological
fact that a smart contract is self-implementable which, on the one hand can be
viewed as an advantage, but on the other hand, because it is unstoppable once the
pre-programed conditions are satisfied, it can pose a serious downside. In such a
situation, it is quite conceivable that a party who suffers a wrong from such
technological error will take legal against the other party who is ostensibly innocent;
as well proceedings may be initiated by the wronged party against the entity
responsible for the coding operation.
As alluded to earlier, blockchain technology has not yet been fully embraced by
the world maritime industry, and it is uncertain whether the shipping sector characterized by its conservatism will abandon its traditional trade practices and readily
take on board the new, revolutionary technologies of the blockchain and smart
contract which are yet to prove their tenacity. There are still many doubts and
uncertainties surrounding the inviolability of data privacy, authentication of identities of contractual parties and security of data protection, especially of financial
information. The most significant factor is how regulatory authorities around the
world will view these developments, as advanced as they may be technologically;
and most importantly perhaps, whether any universal standardization of shipping
practice can be achieved with regard to their application to bills of lading.
On the flip side of the coin, what is on offer in terms of blockchain technology and
the smart contract is options that are likely to translate into higher efficiency in the
shipping business. In the common law system, the phenomenon of case law jurisprudence would appear to provide the kind of flexibility needed to enable the law to
readily accept technological changes and break new ground as in the case of a
blockchain bill of lading. The common law tradition fosters and facilitates this sort of
creativity. Recognizing this verity, the optimum approach is possibly a combination
of the newly advanced technology with traditional business practices and time-tested
patterns and norms. In this regard, it has been suggested that the intended objective
may be accomplished by means of a “divided document” approach comprising on
the one side, a replica of the traditional elements of the bill of lading, and on the
other, elements of a coded program providing for automatic self-implementation;
both sides to be inter-connected. In a blockchain bill of lading, if the blockchain
Blockchain and Bills of Lading: Legal Issues in Perspective
433
charterparties, without express provisions addressing such matters as cargo liens,
demurrage and dispatch, notice of arrival, fuel consumption and speed of the ship,
parties to the contract would be left exposed to numerous potential liabilities.
Furthermore, sellers, buyers, shipowners and charterers usually have their own
standard form contract terms designed for a particular transaction. Whether these
can be retained in a blockchain-based transaction is a legitimate concern. Presumably, the blockchain can be suitably configured to accommodate these and other
matters mentioned above but that has not yet been demonstrably established.
The traditional paper contract is indisputably the basis for a smart contract. That
would include a blockchain bill of lading. Initially, there must be a written paper
contract before a transformation into code form can take place to facilitate the
activation of the smart contract. If a coding error is made in the transformation
process, legal problems are bound to arise. This is associated with the technological
fact that a smart contract is self-implementable which, on the one hand can be
viewed as an advantage, but on the other hand, because it is unstoppable once the
pre-programed conditions are satisfied, it can pose a serious downside. In such a
situation, it is quite conceivable that a party who suffers a wrong from such
technological error will take legal against the other party who is ostensibly innocent;
as well proceedings may be initiated by the wronged party against the entity
responsible for the coding operation.
As alluded to earlier, blockchain technology has not yet been fully embraced by
the world maritime industry, and it is uncertain whether the shipping sector characterized by its conservatism will abandon its traditional trade practices and readily
take on board the new, revolutionary technologies of the blockchain and smart
contract which are yet to prove their tenacity. There are still many doubts and
uncertainties surrounding the inviolability of data privacy, authentication of identities of contractual parties and security of data protection, especially of financial
information. The most significant factor is how regulatory authorities around the
world will view these developments, as advanced as they may be technologically;
and most importantly perhaps, whether any universal standardization of shipping
practice can be achieved with regard to their application to bills of lading.
On the flip side of the coin, what is on offer in terms of blockchain technology and
the smart contract is options that are likely to translate into higher efficiency in the
shipping business. In the common law system, the phenomenon of case law jurisprudence would appear to provide the kind of flexibility needed to enable the law to
readily accept technological changes and break new ground as in the case of a
blockchain bill of lading. The common law tradition fosters and facilitates this sort of
creativity. Recognizing this verity, the optimum approach is possibly a combination
of the newly advanced technology with traditional business practices and time-tested
patterns and norms. In this regard, it has been suggested that the intended objective
may be accomplished by means of a “divided document” approach comprising on
the one side, a replica of the traditional elements of the bill of lading, and on the
other, elements of a coded program providing for automatic self-implementation;
both sides to be inter-connected. In a blockchain bill of lading, if the blockchain
Blockchain and Bills of Lading: Legal Issues in Perspective
433