electronic transport records - how secure are they in …€¦ · · 2011-07-15electronic...

Electronic Transport Records -

How secure are they in shipping

transactions?

PART 1 of 2

Chairman: Lindsay East – Reed Smith

Panellists

Mark Holford – Thomas Miller & Co. Ltd.

Marina Comninos – Electronic Shipping Solutions

Alexander Goulandris – Electronic Shipping Solutions

Russell Harling – Holman Fenwick Willan

Gareth Lewis – World Customs Organization

The Broadgate Tower, 20 Primrose Street, London, EC2A 2RS

Wednesday 23rd February 2011

LSLC - MARITIME BUSINESS FORUM

International House, 2nd Floor, 1 St Katharine’s Way, London, E1W 1UN

Tel: 020 7063 9737 ~ E-mail: shipping @shippinglbc.com ~ Fax: 020 7481 2149 Chairman’s Tel: 020 7063 9736 ~ Chairman’s E-mail: [email protected]

Web-site: www.london-shipping-law.com

Introduction Paper bills of lading have remained entrenched in shipping for the past 800 years. Efforts have been made to create electronic alternatives which must satisfy the requisite legal and security requirements so that there is confidence in the industry for their use. This seminar examines the legal and functional status of electronic bills of lading from the time of the Bolero system to the present day. What progress has been made generally and in the field of international e-customs’ regulation to promote electronic transmission of documents?

Issues:

PART A A Brief History of…– Mark Holford

PART B ESS’s CargoDocs™ - Alex Goulandris and Marina Comninos

� Introduction to ESS � The CargoDocs™ Solution

� Current Status � Legal Framework � Approvals and Reviews

� Key provisions of the contractual framework � Interaction with other contracts: Charterparties, documentary credits and sales

of goods contracts � Demo

PART C eB/Ls – the Legal Perspective

Legal Mechanisms of the ESS Databridge Services and Users Agreement

– Russell Harling � Is it time to replace the paper bill of lading?

� Creating an electronic alternative to the paper bill of lading � Satisfying the requisite legal requirements � How should the system be regulated?

� The P&I Perspective � Approved Systems � Mutualised Risk

� Rotterdam Rules

PART D The World Customs Organization – Gareth Lewis

� The specific role of the WCO � Drivers promoting electronic processes in the customs field

� eCustoms and how it fits in with eB/Ls � International co-operation amongst customs bodies

PART E Curricula Vitae

PART A

A Brief History of….

Mark Holford

1

A brief History of …

Mark Holford

Marketing Director – Thomas Miller

&

Director and VP Legal – ShipServ

Electronic Transport Records - How secure are they in shipping transactions?

23 February 2011

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…a tricky problem

� Seadocs

� BIMCO

� Bolero

� E-Title

� ESS

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Seadocs

� Mid 80’s

� Chase Manhattan Bank

� Immobilisation approach

- Lodged paper B/L

- System transferred entitlement

� Closed - concern over neutrality

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BIMCO

� Formed a project in early 90’s

� Chaired by Mario de Pace, Thomas Miller IT Director

� Lack of funds

� Passed to Ake Nilsen

� Looked for money, and led to…

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Bolero

� Founded 1998

- Joint venture► SWIFT

► TT CLUB

� Now backed by venture capital

� Based around central Title Registry

� Association / Rule Book “multi- party” legal framework

� Has focused on Trade Finance (L/Cs, collections etc)

- August 2010 - facilitated first presentation of documents under a L/C explicitly subject to ICC’s eUCP

� Sees rising demand for eB/Ls - driven by cargo buyers and sellers

- Strong commercial interest to work with others in use of its eB/L as part of a broader e-commerce offering.

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E-Title

� Founded in 2004

� Privately funded

� Rule Book “multi- party” legal framework

� Pier-to-Pier decentralised solution

- Includes Hardware attaching to customers’ application server

- No central registry – endorsement chain travels with document

- Closely emulates the paper process

► Simplifies the legal famework

� Deployed on Singapore Trade Exchange - owned by Singapore Customs

- Expects transactions to start in 2011

- Also in negotiation with two other Asian Government exchanges

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ESS

� Founded 2003

� Funded by 2 investment funds

� “Multi- party” user agreement legal framework

� Facilitates many shipping documents

� Central registry / exchange

� Started live eB/L transactions in 2009

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4 things in common

� Dematerialised documents

� Multi-party legal structure

� Privately funded

� 2011 will be the year of e-B/Ls ?

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Contacts

� Bolero

- [email protected]

� e-Title

- [email protected]

� ESS

- [email protected]

� Thomas Miller

- [email protected] Founders: Blank Rome, Holman Fenwick Willan, Ince & Co, Reed Smith Benefactors: Davenport Lyons, Dewey LeBoeuf, Montgomery McCracken

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Central Registry vs. P2P

Requirement Central Registry P2P

Security

Trade processes

Integration

Legal Framework

• Digital Signatures • Digital Signatures

• Prevent double trading through single central registry database

• Prevent double trading through local hardware solution

• Wide Area Network• External interfacing

• Local Area Network• Internal interfacing

• Multi-party agreement • Multi-party agreement

Interoperability• All parties must agree to use

the same central registry and protocols

• All parties must agree to use the same protocols and hardware

Operations• Concentrated risk• Ongoing operational pricing

• Distributed risk• No operational pricing

PART B

ESS’s CargoDocs™

Alex Goulandris and Marina Comninos

Presentation for

©2007-2011 ESS-Databridge Exchange Limited

By:

London Shipping Law Centre

Alexander Goulandris, CEO

Marina Comninos, General Counsel


00 Agenda

1. ESS

2. Trading with Paper

3. The CargoDocs™ Solution

4. Current Status

5. Legal Framework

6. Key Provisions of the DSUA

7. Demonstration

8. Q&A

2


01 ESS

ESS is the world’s leading provider of electronic shipping and trade documentation

�Established in 2003

�Offers following eDocs Services:

o CargoDocs for bills of lading and related documents;

o eSDS for REACH, GHS compliance;

o eAD for EMCS and other customs requirements.

�Services are refined through the ESS’s User Association, the DDG

�60+ customers include many of the world’s leading companies, including Exxon Mobil, BP, Shell, Brostrom, Morgan Stanley, AET, Ineos, Teekay Tankers, Maersk Tankers and SGS

�30+ employees located in offices in Malta, London and Greece

o Singapore and the Americas offices scheduled to open in 2012

�Industry-neutral company, backed by two major Investment Funds.

3


02 Trading with Paper

4


02 Trading with Paper (cont.)

Use of paper documentation causes significant problems

�Examples of problems includes:

o Delays waiting for draft and original documentation

o LOI exposure for traders, charterers and carriers

o Tied up assets, including working capital

o Fraud potential

o Prevents straight-through-processing of data

o “The paper bill of lading is the key cause of inefficiencies”(UNCITRAL EDI Working Group, Jan 1996)

5


03 The eDocs Alternative

Today CargoDocs™ provides a viable, proven alternative to paper - in use in the European Energy market

�CargoDocs™ replaces all required shipping and trade documentation with eDocs, including negotiable B/Ls

�Service was developed and tested for 2.5 years by 50+ leading oil companies, traders, carriers, banks, ship agents and surveyors

�All enhancements to CargoDocs ™ are led by the industry through the company’s user association, the DDG

�Service is currently being rolled out at crude terminals, refineries, storage facilities and FPSOs

�Live customers include: BP, Shell, Exxon Mobil, ConocoPhillips, Ineos, Morgan Stanley, Mabanaft, Brostrom Tankers, Teekay Tanker, Tarntank, Maersk Tankers, SGS, Inchcape, Denholm-Barwil, etc.

6


03 The eDocs Alternative (cont.)

7


04 Current Status

CargoDocs™ is being rolled out across European crude/product trades and the US/Caribbean

�Ineos’s Finnart terminal (products) – live

�Ineos’s Grangemouth refinery (products) – live

�ConocoPhillips’s Teesside terminal (crude/NGL) – live testing

�Exxon’s Baton Rouge refinery (products) – live testing

�BP Hamble terminal (crude) – live testing

�Primorsk Oil Terminal and Primorsk Product Terminal – Preparing to Test Q1 2011

8

©2007-2011 ESS-Databridge Exchange Limited 9

05 Legal Framework

ESS’s Exchange ensures delivery of legally effective eDocs

�The principal agreement which underpins ESS’s CargoDocs™Services is the ESS-Databridge™ Services & Users Agreement (DSUA)

�DSUA is a multilateral agreement between all Users of the Exchange and between each User and ESS which:

� Regulates how Users conduct business within the Exchange

� Outlines the service level and security obligations of ESS as the Exchange operator

� Ensures that all participants are committed to treating electronic documentation as the functional and legal equivalent of paper documents


05 Legal Framework (cont.)

Approvals and Reviews:

�The DSUA has been reviewed and revised over four years to ensure legal and commercial acceptability. Reviewed by:

o International Group of P&I Clubs (for carriers)

o LEAP (for traders, oil companies and banks)

o OISG (oil companies)

o ITIC (ships agents)

�More than 40 companies have signed the DSUA, including BP, Ineos, Shell, ExxonMobil, Teekay, Morgan Stanley, Iver Ships, Maersk, ConocoPhillips and AET

�Currently working with customs organisations globally to ensure acceptance by governmental authorities


05 Legal Framework (cont.)

ESS’s eB/Ls replicate each of the three core functions of a paper B/L

�Receipt:

� T&C 7.3: eB/Ls will contain an acknowledgement by the carrier of the receipt of goods

� Section 7 Electronic Communication Act: a document signed electronically is admissible in evidence in relation to the authenticity or integrity of the data or communication concerned

�Negotiability - Electronic transfer of title is regulated by ensuring that:

� Users have the same functionality and control over the eB/L as they would have over a paper B/L; and

� only one User has control of the eB/L at any one time

�Contract of Carriage Function:

� Original Shipper/Carrier: T&C 7.4 incorporates all mandatory treaties, conventions or national laws by contract

� Intermediate Holders – non US law governed contracts of carriage: T&C 8 mirrors the provisions of COGSA 1992 and, by way of novation, transfers the contractual rights and obligations arising under the eB/L through the chain of holders so that the rights (and obligations) of each holder mirror the rights (and obligations) they would have had if they had been using a paper B/L. The Carrier attorns to the transfer automatically via the Exchange.

� US law governed contracts of carriage – see law and jurisdiction

11


06 Key Provisions of the DSUA

DSUA: Law and Jurisdiction

�The DSUA is governed by English law:

� The only exception is US law governed contracts of carriage, in relation to which transfer of title is governed by the law of the State of New York including the New York Uniform Commercial Code and the United States Uniform Electronic Transactions Act 1999 (T&C 8.1)

� This avoids the cumbersome novation and attornment approach for US law governed contracts of carriage as the UCC adopts a very simple approach to eB/Ls

�Jurisdiction - Users are entitled to select between the jurisdiction of the US and UK courts. In this two tier system:

� ESS agrees that proceedings in connection with any dispute involving ESS will be determined either in the US or the UK, depending on the choice of jurisdiction made by the User in the DSUA

� Any dispute between Users arising under the DSUA will be subject to the jurisdiction of the English courts, unless all Users concerned have elected US jurisdiction

�Disputes arising under the underlying contracts (i.e. the eB/L) will follow the law and jurisdiction provisions of that contract


06 Key Provisions (cont.)

DSUA: Liability and Insurance

�Insurance - T&C 4.2: ESS is required to maintain insurance:

� for eRisks with a limit of US$20 million for any one eB/L

� for other liabilities arising under the DSUA with a limit of US$1 million

�eRisks comprise:

� eFailure: risks of losses caused by the internal operation of the Exchange including a failure which results in the misissuance ormisdelivery of an eDoc or the inability to access an eDoc

� eCrime: risks external to the operation of the Exchange which may result in a fraudulent interaction with an eDoc, for example, hacking



DSUA: Key Procedures

�Amending eDocs:

� Users must take such steps as they would have taken had the eB/L existed in paper form. Consent of Carrier and Shipper required

� Splits are also accommodated under the amendment functionality

�Converting eDocs to Paper: Users can convert an eB/L to paper if necessary (e.g. customs requirement or trading with a non-user):

� Print Convert: requires the carrier or carrier’s agent receiving a request to Convert to print off the eB/L and manually sign it. The trade log (identifying the previous transfers in the form of an endorsement chain) is attached to the (now) paper bill

� NB: A carrier is obliged to comply with a request to Print Convert (c/f Rotterdam Rules)



DSUA: Model Clauses

�Use of eDocs will impact on other contracts relating to the international sale of goods

�DSUA incorporates model clauses to allow for the use of eDocs under:

� Charterparties: this clause has been approved by INTERTANKO

� Sale of Goods Contracts

� Documentary Credits

� this incorporates the eUCP, which provides the necessary rules for the presentation of the electronic equivalents of paper documents under L/Cs

� The Notice of Completeness required under eUCP can be sent on the Exchange


07 Demonstration

16

demo.essdatabridge.com


08 Q&A

17

“The telephone is an interesting device – I predict that one day that every City will have one.”

Mayor of Chicago, 1891


For More Information please contact:

Alex Goulandris, Chief Executive OfficerT: +44 7814 219 668E: [email protected]

Marina Comninos, General CounselT: +30 6947 616906E: [email protected]

www.essdocs.com

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