Alan Mackinnon, Claims Director at the UK P&I Club and leading authority on the legal aspects of electronic Bills of Lading, recently spoke with essDOCS to share his first-hand account of how eB/L approval by the IG P&I came about, plus provide insights on the criteria for legal-validity of solution providers like essDOCS, the UK Club's current advice to members using eB/Ls and more.

Can you give us some history on Club P&I approval and how it came about?

Alan Mackinnon: The clubs in the International Group first considered electronic trading in the late 1990s. They were sympathetic to the idea of electronic Bills, but this had to be balanced with the need to ensure that using electronic Bills of Lading did not expose an owner to claims that they would not have faced while using a paper Bill of Lading.

ESS, or essDOCS as it’s known today, first approached the clubs in 2005. We were able to agree an interim level of cover by arranging a market reinsurance for owners wishing to use essDOCS' solution, at no cost to the owners or to essDOCS, while we worked through further contractual issues.

The major breakthrough came when full approval was granted in 2010, and since that time members using CargoDocs are covered in the normal manner.

What exactly does Club approval mean for members using eB/Ls

In short, it means that members can sleep easy in the knowledge that they are in exactly the same position they would be in if they were using paper Bills of Lading.

What do clubs look at when considering whether to approve an eB/L provider?

The Clubs want to know that using electronic Bills is first and foremost safe, they want to know that the cargo will be delivered to the right people, that the terms of the Bill of Lading contract will be respected, and that all of the information about the cargo will be accurately recorded in the electronic Bill.

In other words, the Clubs want to know that the system in question works in exactly the same way as a paper Bill. To do this, we look at all aspects of the system, particularly how it works in practice and its legal structure. We also consider what an owner’s option is if something with system goes wrong, although thankfully that has not happened until now!

Why do you think this is the way forward for Ship Owners? What is the value for owners?

In two words: speed and simplicity. The world has used paper Bills for so many years because that is what everyone is used to. But no one would pretend that it’s perfect. Paper Bills can go missing, they can be forged, they can get into the hands of the wrong people. And of course everyone knows that paper Bills get delayed in the banking system, necessitating the risks associated with owners discharging against LOIs, and potentially compromising Club cover as a result. Using electronic Bills avoids these delays, and some of our members who use them tell us they hardly have to use Letters of Indemnity anymore because the eB/Ls passed through the system so much faster.

What does the UK Club currently advise its members on eB/Ls?

In short, the club is relaxed on electronic Bills. If members want to use them, that is absolutely fine provided the system has been approved, which is the case with essDOCS’ solution.

From a claims perspective, we see no downside whatsoever. We advise members to ensure everyone involved in the transaction is in agreement to use electronic Bills, and we suggest incorporating the BIMCO electronic Bill of Lading clause into charterparties.

Do you see a wider industry shift towards eBLs?

It’s a chicken and egg situation. For many years, although we were aware that systems were running, we didn’t come across many owners using them. That has changed significantly in the last five years, with many of the large trading houses embracing electronic Bills and encouraging their ship owners and buyers to do the same.

When the numbers increased we saw a lot of enquiries. This has tailed off in the last 12 months, and we suspect that this reflects greater familiarity with the product rather than a loss of interest, i.e. that eB/Ls are now becoming more mainstream, a lot of the information required is readily available online, and more users have already had first-hand experience with the product.

The good news is that we haven’t seen a single claim, at least not yet!

Profile: Alan Mackinnon

Alan is currently the Claims Director for the UK Club. He joined Thomas Miller in 2005 after five years as a solicitor with a leading firm of maritime lawyers in London. From 2007 to 2010 he held overall responsibility for management of the UK Defence Club claims before moving to the Deputy Claims Director role of the P&I Club. He became Claims Director at the beginning of 2015. Alan sits on the Bimco Documentary Committee, and chairs the International Group Bills of Lading subcommittee.