Does Delivery of PIN Code Constitute Delivery Under a Bill of Lading?
Introduction
With our world becoming more and more technologically advanced, new technologies are introduced to the shipping industry, which have improved the performance and efficiency of ship carriers. However, the recent English Court of Appeal decision MSC Mediterranean Shipping Company SA v Glencore International AG [2017] EWCA Civ 365 highlights the potential pitfalls of ship carriers adopting these new technologies without having due regard to their legal or security implications.
Background
Between January 2011 and June 2012, Glencore International AG (“Glencore”) made 69 shipments of drums of cobalt briquettes which were carried by Mediterranean Shipping Company SA (“MSC”) to Antwerp. This case concerns the 70th shipment, which was a cargo of three such containers. Glencore was the holder of the bill of lading (“the B/L”) and the owner of the cargo. MSC was the carrier.
The Antwerp Port operated an electronic release system (“ERS”), under which the carriers provided, against bills of lading, computer generated electronic numbers (“PIN Code”) which were given to the relevant receivers or their agents of the port terminal. The holders of bills of lading had to present the PIN Codes to the terminal in order to take delivery of the goods.
The B/L, issued on 21 May 2012, provided that one original Bill of Lading must be surrendered by the Merchant to the Carrier (together with outstanding freight) in exchange for the Goods or a Delivery Order.
On 24 May 2012, Glencore sent two copies of the B/L, plus other documentation, to C Steinweg NV (“Steinweg”), Glencore’s agents at the port and the notify party in the B/L. Steinweg then lodged with Mediterranean Shipping Company Belgium NV (“MSC Belgium”), the local agent of MSC, one of the copies of the B/L and paid the handling charges. On 22 June 2012, MSC Belgium emailed Steinweg a Release Note which contained three PIN Codes, one for each container, which were valid from “discharge” to 25 July 2012. The vessel arrived at the port on about 26 June 2012, and the containers were then discharged and placed at the MSC Terminal. On 26 June 2012, Steinweg communicated the PIN Codes to its hauliers Carjo Trans BVBA (“Carjo Trans”). However, when Carjo Trans went to collect the containers, it found that two of them had already been collected. It was common ground that they were delivered to “unauthorized persons”.
The main issue was whether MSC’s provision of the PIN Codes to Steinweg constituted provision of a Delivery Order within the meaning of the B/L. The trial judge found in favour of Glencore. MSC appealed.
Judgment
Does the Release Note and PIN Codes constitute a Delivery Order?
The English Court of Appeal confirmed the lower court’s judgment and held that under the English law, a delivery order should be regarded as having the same meaning as a ship’s delivery order, defined under the Carriage of Goods by Sea Act 1992.
The Delivery Order is to be provided by the owners of the ship as an alternative to actual delivery in exchange for the B/L and in substitution for it. As such, the Delivery Order should have the key attribute of a bill of lading, namely an undertaking by the carrier to deliver the goods to the person identified in it, i.e. Glencore or Steinweg in the present case. The Release Note with the PIN Codes was however not a document containing such an undertaking. The Court thus concluded that the obligation of MSC to produce a Delivery Order was not satisfied by a Release Note which does no more than instructing the Terminal to deliver the goods against the entry of PIN Codes which it provided to Steinweg.
Does the provision of PIN Codes constitute (symbolic) delivery
MSC further argued that the delivery of the PIN Codes amounted in law to delivery of the goods. MSC submits that delivery need not consist only of a physical transfer of the property. There can be a symbolic or constructive delivery of which the classic instance is the delivery of a key to the warehouse where goods are stored. The Court, however, found that the argument was not compelling.
Whether or not delivery of a means of access to goods constitutes delivery required by such a contract must depend on the context and terms of the contract. The Court found that, in the present case, the parties contemplated either actual delivery against the presentation of a bill of lading or in accordance with a delivery order. In the absence of express provisions spelt out in the contract to the contrary, delivery means actual delivery, not delivery of a means of access.
Further, the Court agreed with the judge at first instance, that so long as the PIN Codes remained valid, MSC Belgium had the power, albeit not the contractual right, as against Glencore or Steinweg to invalidate the PIN Codes and thus prevent delivery of the containers. Accordingly, MSC did not divest itself of all powers to control any physical dealing with the goods. In conclusion, the Court held that the provision of the PIN Codes does not amount to delivery.
Conclusion
The use of an electronic release system whereby containers may be retrieved from a container terminal by reference to computer codes is now a common procedure which can be found in ports all over the world, in particular large container ports. The Court of Appeal’s decision confirms that delivery of PIN Codes would not discharge the ship carrier’s obligation to physically deliver the goods to the cargo owner and hence the risk of mis-delivery (through the use of PIN Codes) rests with the ship carriers. For ship carriers, to avoid such risks, it is suggested that the terms of the bill of lading should be amended to clearly state that delivery of PIN Codes would constitute delivery of the goods by the carriers and discharge their obligation to physically deliver the goods to the cargo owner.
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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.
