The recent judgment of the English Court of Appeal in MSC Mediterranean Shipping Company S.A. v Glencore International AG, may be a reassuring one for exporters, but should also be seen as a grave warning to take extra precautions to ensure cyber security systems are secure.

The judgment deals with the use of an electronic release system (ERS) by the Port of Antwerp. The ERS involved carriers providing the receiver of goods, their agents and the port terminal, with a computer generated pin code sent via electronic data exchange. Such pin codes enable persons collecting goods to gain access to the terminal and collect the relevant containers. They replace hard copies of delivery orders or release notes given against a bill of lading.

Glencore made various shipments of drums of cobalt briquettes to Antwerp carried by MSC. The shipment in issue was one consisting of three containers, being the 70th shipment of this kind carried by MSC for Glencore. On collection it was discovered that two of the containers had been removed from the terminal by unauthorised persons.

MSC Container vessel
MSC Container vessel

The bill of lading provided that it would be surrendered by the merchant to the carrier in exchange for the goods or a delivery order. MSC submitted that the provision of the pin code constituted a ‘delivery order’ as envisaged in the bill of lading. MSC therefore contended that it had complied with its contractual obligations. It further argued that the pin codes had been used in 69 previous shipments and therefore it became an implied contractual term between MSC and Glencore that a pin code would be given in place of a delivery order.

Glencore argued that, in terms of the bill of lading, MSC was obliged to only release the goods to a person who presented the bill of lading or delivery order.

The court found in favour of Glencore. Referring to section 1(4)(b) of the Carriage of Goods by Sea Act 1992, it held that a delivery order is an undertaking by the carrier to a person identified in that document to deliver the goods to the person identified therein. MSC had not given such an undertaking in the release note containing the pin code and thus had not complied with its contractual obligations in terms of the bill of lading. In the Court’s view, if any undertaking had been provided by MSC at all, it was to release the goods to the first presenter of the correct codes, which was not the undertaking that the bill of lading envisaged.

MV Chacabuco 2006 Built 4200 TEU Container ship
MV Chacabuco 2006 Built 4200 TEU Container ship

Regarding the estoppel argument advanced by MSC relying on the previous 69 shipments in which the ERS was used, the Court held that Glencore had not given any representation that delivery of the goods to a party other than to it or its agents would be acceptable. The issue had simply not arisen in relation to the first 69 shipments because no goods had been removed by unauthorised persons. Further, there had been no variation of the contract to the effect that delivery of the goods to the first presenter of the pin code would constitute fulfilment of MSC’s obligation to deliver the goods.

It was contended by MSC that the unauthorised persons gained access to the pin codes by hacking Steinweg’s computer systems (Glencore’s agents).  The court declined to allow this allegation to be relied on.

This judgment illustrates a continued movement towards the use of cyber technology in the logistics sphere. It is imperative that parties wishing to export goods from Africa’s ever increasingly busy ports are alive to the possible use of ERS at ports of discharge. In due course, these electronic measures will no doubt be introduced in South Africa and this will then affect importers as well.  Exporters should make the necessary enquiries and ensure that their cyber security measures, and those of their overseas agents, are sufficient to prevent similar occurrences.

“Carriers may be surprised at the outcome of this case and the judgment’s apparent refusal to accept the new age of paperless commerce.  They will however have to amend their contracts of carriage to reflect the actual procedure used to release goods.  They will also have to ensure that the amended procedure is not in breach of any statutory obligation at the port of discharge that may override the terms of their contract.” Concluded Kirsten Mullins, Associate, Norton Rose Fulbright