Electronic signature of Bills of Lading under South African Law
The recent signature in Rwanda of the African Continental Free Trade Area (AfCFTA) involving 48 African countries should dramatically increase trade within Africa. With contracting parties situated regions and continents apart and the digitisation of transactional activity making hand-signed agreements a thing of the past, international law is having to adapt to the modernization of the contractual value chain.
International law responded quickly to digitised transactional advancements by recognizing electronically signed of Bills of Lading forty years ago. The South African legislature has been slower to provide the same clarity, and in the absence of incorporated International law on the subject, the legislature has some work to do to catch up with international law in this area.
Article 14(3) of the Hamburg Rules (United National Convention on the Carriage of Goods by Sea, 1978) specifically provide that a bill of lading is valid if electronically signed. The Rules include electronic signatures in the definition of ‘signature’ of a bill:
The signature on the bill of lading may be in handwriting, printed in facsimile, perforated, stamped, in symbols, or made by any other mechanical or electronic means, if not inconsistent with the law of the country where the bill of lading is issued.
South Africa has not ratified this Convention and, accordingly, the question of whether an electronic signature on a bill of lading constitutes a “signature” for the purposes of concluding a valid contract, needs to be answered by looking to local legislation.
The Electronic Communications and Transactions Act, 2002 (the “Act”), confirms that written documents may be signed electronically. However, the Act does not specifically address whether bills of lading are documents which may be electronically created or signed.
A bill of lading has three main functions: it serves as a receipt for the cargo described in the bill; it serves as evidence of the contract of carriage; and, in certain cases, it is a document of title allowing for transfer of the ownership of the goods, by transfer of the bill to another holder. The Act does not expressly address whether an electronically signed or created bill of lading may validly perform any of these functions, but we will examine in this note whether this leaves any concerns for the use of electronic signatures.
The Act recognises the validity of electronic transactional data, such as electronic signatures. By virtue of this recognition, a bill of lading reduced to or containing electronic data (such as an electronic signature), would constitute a legally acceptable and recognisable signed document and accordingly would constitute proof of receipt of cargo and evidence of the contract of carriage. Accordingly, this approach covers the first two functions of a bill of lading.
Much like a hand-written signature on an ordinary document, to constitute a document of title, the data constituting the electronic signature on the bill would need to be verifiable as the signature of the signor, and the transfer of the document and accordingly of the ownership of the goods would need to take place in a manner that is recognised by law as a true expression of the contractual intent of the parties. The challenge, of course, with electronic signatures on bills is verifying an electronic signature (an easily reproducible image) as not only being the signature of the signor, but also as being the true expression and intent of the party whose signature is reflected, to transfer title in the document and the goods it describes.
The technology to negotiate bills of lading electronically has existed for some time (the TT Club launched its system known as Bolero in 1998) and now relies on the same blockchain software that drives crypto-currency systems. Such systems are starting to gain traction particularly in trades where the bill of lading is not a document of title, for example when transferring goods between members of the same international group. There is however still a long way to go before there is global recognition of transfer of electronic bills of lading as being valid in all countries. This concern is also true in South Africa considering that the Act does not specifically recognise the validity of an electronic bill of lading.
South Africa promulgated the Sea Transport Documents Act in 2000 which contemplated the electronic transfer of property in cargo by way of the electronic transfer of a bill of lading. The validity of that type of transfer was subject to the promulgation of regulations by the Minister of Transport. These regulations were to prescribe the circumstances in which and the conditions subject to which an electronically transferred bill of lading would constitute a sea transport document which could be transferred and thereby transfer ownership of the cargo described in the bill of lading.
Unfortunately, 18 years later, the Minister has yet to produce draft regulations. Until such time as those regulations are produced, trading parties who decide to sign bills of lading electronically and transfer them electronically would have to be satisfied that they could prove valid electronic transfer of the “document” and the intention that ownership of the cargo would be transferred on transfer of the document. As noted above, the Electronic Communications and Transactions Act, 2002 has general application which means electronically signed bills of lading are recognised as being validly signed, but this does not deal with negotiation of the bills of lading.
South Africa and its fellow African countries need to pass legislation if they are to benefit from the reduced costs, saving in time and stress and additional security that the electronic negotiation of bills of lading, statutorily regulated, would provide.
The Inside Africa team would like to thank Yasmine Wilson, Candidate Attorney, for her contribution to this blog post.