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• Negotiability
• Negotiable Instruments
• Contracts For Shipment Of Goods By Air
• Should New Zealand Adopt Articles 16 And 17 Of The Model Law?

4 Transportation documents

63 ARTICLES 16 AND 17 OF THE MODEL LAW deal with transportation documents. Their main purpose seems to be the promotion of confidence in the use of electronically generated information. The purpose of both articles 16 and 17 is to ensure that the actions to which references are made can be performed electronically without causing prejudice to those who choose to trade in that way.¹⁵⁵

64 Some of the actions listed are not required by law to be performed “in writing” or “signed”. Others, such as those given to holders of “received for shipment” bills of lading by the Mercantile Law Amendment Act 1922,¹⁵⁶ are based on signed documents.

65 A barrier to electronic commerce is negotiability of documents of title. As we pointed out in ECom 1,¹⁵⁷ the practical barrier to the introduction of an electronic equivalent of a bill of lading is the need for an infrastructure to enable the person, for the time being entitled to the bundle of rights flowing from the bill of lading, to verify the validity of a particular transaction so that he or she can be confident that what has been transferred does in fact represent title to goods which he or she has acquired.

Negotiability

66 Articles 16 and 17 of the Model Law apply to all forms of carriage of goods. But, it is only in relation to the bill of lading that the question of negotiability arises. All other documents to which the articles refer will be capable of being given legal effect through the change to the definition of the term “writing” brought about by the passage of section 29 of the Interpretation Act 1999.¹⁵⁸

67 In the paper-based environment, a negotiable bill of lading is a unique document upon which shippers, consignees, endorsees and banks can rely to provide title to goods in transit by sea. In endeavoring to apply the same standard of “uniqueness” to an electronically generated document, article 17(3) of the Model Law (in its final form) has created a difficulty. ¹⁵⁹  As Howland puts it:

When considering the creating of a right and the transferring of it to one person, a view amongst the UNCITRAL delegates was that a method could be regarded as satisfactory, if it could be described as rendering a message or messages “unique”. Supporting this, there was a view that the notion of “uniqueness” was not unknown to practitioners of transport law and users of transport documents. It was felt by some that, if the description “unique” is applied to the messages, it could perhaps be assumed that this would indicate sufficiently that there is at any one time only one right or obligation and only one recipient of it.
However, when States are considering adopting this text into their bodies of law, some legislators may feel the need to give more attention to this language in order to avoid any possible misunderstandings, because some doubt has been expressed about the adequacy of this word “unique”. Drafters of legislation will need to remember that all electronic messages are, in any case, always and necessarily unique – each with its own addressee, its own time of dispatch, its own contents. They will remember, too, that under some registry-based methods, a single initial allocation of a right or a single transfer of it to one person will use several separate individual messages, not just one; so the word “unique” must not be made to mean “only one” message. Furthermore, they will realise that several sets of messages could be sent to several different persons at the same time or in quick succession, purporting to transfer the same right. Each of the messages and, indeed, each of the transfers, would be in themselves “unique”; yet all but one of them may be fraudulent.¹⁶⁰

68 The essence of the points made by Mr Howland is that it is important to ensure only one recipient (and no other person) obtains the benefit of the transfer of title to goods which is inherent in the notion of an electronic functional equivalent to a bill of lading.

69 It is also important to note that at the 32nd Session of UNCITRAL in 1999 there was discussion about further coordination and cooperation on the topic of transport law. In the report of the 32nd session UNCITRAL noted: ¹⁶¹ 

. . . it appeared that further harmonization in the field of transport law would greatly benefit international trade. The working group had found a number of issues that had not been covered by the current unifying instruments. Some of the issues were regulated by national laws which, however, were not internationally harmonized. Evaluated in the context of electronic commerce, that lack of harmonization became even more significant. It was also reported that the working group had identified numerous interfaces between the different types of contracts involved in international trade and transport of goods (such as sales contracts, contracts of carriage, insurance contracts, letters of credit, freight forwarding contracts, as well as a number of other ancillary contracts). The working group intended to clarify the nature and function of those interfaces and to collect and analyse the rules currently governing them. That exercise would at a later stage include a re-evaluation of principles of liability as to their capability with a broader area of rules on the carriage of goods.

Accordingly, further work in this area is likely.

Negotiable instruments

70 We are of the view that the barrier of “negotiability” is essentially a market based problem rather than a legal problem. It is to be noted that there are no express requirements in either the Hague-Visby Rules or the Mercantile Law Act 1908 for bills of lading to be produced in paper form or to be signed in order to be valid as an instrument transferring title to goods.¹⁶² Now that the term “writing” has been defined, as a matter of New Zealand law, to include electronically generated information¹⁶³ the legal obstacles created by form requirements have been removed.

71 It is important that we explain further our view that the problem of “negotiability” is essentially a market based problem rather than a legal problem. In ECom 1 we mentioned the Bolero project.¹⁶⁴ The Bolero system is a contractual system which provides a rule book by which all participants are bound which supplies the infrastructure required to ensure that title can be passed to goods in transit from vendor to purchaser through the means of a functional equivalent of a bill of lading. The infrastructure is important as there needs to be a register of interests in some form (whether electronic or otherwise) which provides a method by which those who are using electronic means to transfer title in this way can check whether the person from whom they are buying is shown as the person entitled to transfer goods. Such a “register” must either be established by the State under some regulatory means or through contractual means – such as the Bolero system. There is no enthusiasm in New Zealand for the notion that the Government should, by legislation, create a register which can be used for this purpose although, in principle, there is very little difference between this type of register and the type of register used under the Motor Vehicle Securities Act 1989 or under the proposed Personal Property Securities Act.¹⁶⁵

72 Our concern as to the adequacy of article 17 of the Model Law is more directed to the absence of an infrastructure through which it can operate than anything else; although we are also persuaded that there is merit in the argument raised by Howland that there are difficulties with the notion of “uniqueness” in the context of electronically generated messages.¹⁶⁶

73 The Hague-Visby Rules do not apply to non-negotiable instruments. The non-negotiable instrument, not being a document of title, faces no obstacles to being replaced by electronic waybills.

CONTRACTS FOR SHIPMENT OF GOODS BY AIR

74 Contracts for the shipment of goods by air are governed by the Carriage by Air Act 1967. Section 7 of that Act gives force to the Warsaw Convention and to the Guadalajara Convention. The principal document provided for by the Warsaw Convention associated with contracts for carriage of goods is the air waybill. Although the Warsaw Convention provides that air waybills may be either negotiable or non-negotiable, in practice air waybills are used as non-negotiable instruments. As was stated in ECom 1 (para 129),

. . . given the speed of air transport there would seem to be little reason to issue a negotiable air waybill. (para 129)

Hence air waybills function as prima facie receipts and evidence of the contract of carriage: article 11(1).

75 We noted that the “Warsaw Convention as it applies in New Zealand does not appear to permit air waybills to be issued electronically” because of provisions that contemplated a physical delivery of the air waybill.¹⁶⁷ To remove these impediments to the use of electronic air waybills we recommended adoption of the Montreal Protocol No 4, and set out the relevant article at para 132. ¹⁶⁸ 

76 Since the Commission’s release of ECom 1, the Civil Aviation Amendment Act 1999 has been passed and comes into force 1 December 1999.¹⁶⁹ As reported by the Transport and Environment Committee (at Select Committee stage), passing the Civil Aviation Amendment Bill will implement Montreal Protocol No 4 and, in doing so,

. . . enable[s] the use of electronic waybills, which would result in compliance cost saving in terms of reduced paperwork and allow for the more expeditious processing of consignments.¹⁷⁰

SHOULD New Zealand ADOPT ARTICLES 16 AND 17 OF THE MODEL LAW?

77 We are not persuaded at present that articles 16 and 17 should be enacted as part of the law of New Zealand at present. We take that view for the following reasons:

• Save for negotiable bills of lading, the definition of the term “writing” contained in section 29 of the Interpretation Act 1999 will solve any potential for discrimination of electronically generated documents.
• There are no requirements of law involving “signature” which would prevent title to goods in transit from passing from vendor to purchaser simply because any contract for the sale of those goods had been entered into in electronic form.
• The Hague and the Hague-Visby Rules, which have force of law in New Zealand through section 209 of the Maritime Transport Act 1994 and the Mercantile Law Amendment Act 1994, do not expressly require bills of lading to be issued in paper but, we accept, that the references to “possession”, “delivery” and “endorsement” in sections 13A–13C of the Mercantile Law Act 1908 (as amended by the Mercantile Law Amendment Act 1994) may be interpreted as requiring the existence of a physical document. It is noted that when an amendment was made to section 13 of the 1908 Act in 1994, that the issue of the medium was not directly addressed.¹⁷¹ The Hamburg Rules, to which we referred in ECom 1,¹⁷² anticipate electronic bills of lading but those rules have not been adopted under New Zealand law. While the Mercantile Law Amendment Act 1994 contains a provision permitting regulations to be passed to cover the use of electronic equivalents to a bill of lading, no such regulations have yet been passed.¹⁷³
• Questions of negotiability can be resolved by contractual means.¹⁷⁴ Pending much greater international adoption of the Hamburg Rules, we believe that the market should be encouraged to find contractual solutions. Only if contractual solutions prove to be insufficient should legislation be considered.

New Zealand should await results of further international work, in particular the work identified by UNCITRAL by its 32nd session in 1999,¹⁷⁵ before deciding whether to enact provisions akin to articles 16 and 17 of the Model Law. Certainly no practical problems have been raised with us to suggest there is a need for immediate legislative action. In our view New Zealand should await further developments at an international level before making a final determination on whether legislation is necessary.

78 Further submissions on these issues are sought.