Delays in document signing – who is to blame?

A London arbitration in  2007 relating to a voyage charterparty on the Asbatankvoy form for the carriage of gas oil from Abidjan to Lagos, raised an interesting question regarding liability for demurrage. At conclusion of loading, the vessel was ordered by charterers to leave the loadport without waiting for the cargo documents, which would be signed by the agent. The owner initially agreed to this request but, as a result of a misunderstanding, the vessel did not heed this instruction, remaining at the load port until the cargo documents were completed, some 3½ hours later. The tribunal held that the owners were liable for the delay.

As a consequence of the delay, the vessel missed the laycan at the discharge port under the charterer’s sale contract with their receivers. However, the tribunal held that the owners could not be held responsible for the losses associated with the missed laycan.

Bills of Lading and Fraud

As reported at the 13^th Session of the United Nations Commission on International Trade Law Working Group on Electronic Data Interchange in 1996, one of the perceived disadvantages of traditional bills of lading is the ease with which a fake set of bills can be issued, particularly as modern technology provides numerous tools which mean forged bills can look indistinguishable from their genuine counterparts. By way of illustration of the magnitude of the problem, after investigators were appointed to look into the regularity with which forged bills of lading were being accepted in a West African Country to secure the release of laden containers, it was revealed that, during a 6 month period, 29 forged bills of lading had been accepted, with many more detected prior to acceptance (UK P&I, Obtaining Cargo by Fraud, January 2005).

A shipowner delivering cargo under a forged bill of lading will be liable to the true owner of the cargo for its value. As noted by William Leung King Wai in Misdelivery under forged bills and Misdelivery in the absence of original bills and exemption clauses (2002), the issue is one of risk allocation: a shipowner issues bills of lading to serve as the key to the goods and is best placed to recognize its own bills of lading. If one of two innocent people must suffer for the fraud of a third, it is better that the loss falls on the shipowner, whose responsibility it is both to look to the intergrity of his bills and to care for the cargo in this possession and to deliver it aright, rather than on the true goods’ owner, who holds a valid bill and expects to receive his goods in return for it.

As noted by the UK P&I Club in its report on Obtaining Cargo by Fraud in 1995, this problem is exacerbated by the apparent ease with which people can obtain possession of a blank original bill of lading, which are all too often left unprotected in offices. A blank form of bill of lading may be used to create and negotiate a fraudulent bill of lading without much difficulty. In that way, a fraudster can trade in goods that do not exist and can obtain bank credit based on nonexistent collateral. Such fraud necessarily entails the forgery of the authorized signatures on the bill of lading. An entire bill of lading may be counterfeited, the signature may be forged, the quantity of the goods may be altered, and the consignor may fraudulently sell the same goods two or three times to different buyers.

Instances of fraud have also been highlighted in the 2007 edition of ITIC’s Intermediary. The article focused on a practice which is common in the liner trade, of delivering cargo at one port when the original bills have been surrendered at another. The practice is called a ‘Telex Release’ although it is now almost invariably made by email. The agent who has received the original bills sends an email ‘Release’ to the agent at the discharge port, confirming that the full set of bills have been surrendered to him and that the cargo can be released. A key problem with such ‘Releases’ is email fraud: ITIC has recently received several claims involving ‘Releases’ by faked emails. These are e-mails, received by discharge port agents which have been manipulated to appear as though they have originated from the load port agent, and authorise release of cargoes.

In its article, ITIC noted that “fraud in shipping is endemic, cargoes are valuable, and it has never been easier to forge documents, electronic communications, bills of lading, etc”. It is crucial therefore that appropriate safeguards are put in place to prevent or minimise the risk of fraud. Such safeguards include ensuring that electronic communications are secure and access to them is controlled, educating personnel as to the risks of fraud and measures to combat it, and implementing procedures to control the dissemination of blank bills of lading. 

The case report below further illustrate the nature of the problem: