Nordisk Skibsrederforening

BIMCO Electronic Signature Clause 2021

Nordisk, together with other actors from the maritime community, recently worked with the BIMCO Documentary Committee to develop an electronic signature clause.  The purpose of the exercise was to craft a clause that would allow parties to sign a contract, and any documents associated with or required by such contract, electronically; thereby making the formality of signing documents more straightforward.  Shipping, like other industries, has become increasingly digitalized and this fact in part inspired the decision to create this new clause.

The team spent a fair amount of time defining an electronic signature to ensure that the parties to the contract and those who might be called upon to interpret it, such as arbitrators or courts, would be clear as to what constituted such a signature. The adopted definition is purposely broad and is in line with the EU and UK laws on electronic identification.  The permissible types of signatures include cutting and pasting or typing a name into a contract, inserting an image into a contract or using a digital signature created by encryption technologies such as DocuSign.

Are signatures necessary?
Given that few charterparties are physically signed, some may question the need for such a clause.  A recent case Nordisk handled in Italy illustrates the difficulties that may arise when a charter is not signed and the relevant importance of such a clause.

Under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “Convention”), an arbitration agreement must be in “writing[1]” for it to be enforceable.  While many signatories to the Convention accept that such an agreement must only be evidenced in writing, such as in a recap, some interpret the Convention to require such an agreement to be signed by the parties.

In the aforementioned case, a dispute arose under a charter governed by English law and subject to London arbitration. With Nordisk’s assistance, our member won the arbitration in London, but faced difficulties in trying to enforce the award against the respondent former charterers, an Italian corporation, in Italy.  In the enforcement proceedings, the charterers claimed that the arbitration agreement, placed into the recap of the charterparty by their own brokers, was invalid and, therefore, non-binding, because neither party had signed the contract.

Unfortunately, Italian courts disagree on whether an arbitration agreement has to be signed to be legally binding, so there is no clear-cut answer.  The case was eventually settled after much time and money was spent on arguing the point, but had the contract been signed with the ease of electronic signatures, this issue may have been avoided.

Sub-clause (b) of the BIMCO electronic signature clause was drafted with problems of enforceability, not only of an arbitration agreement, but indeed the contract as a whole, in mind.   One of the main points courts address in cases where questions of the validity or enforceability of a contract or clause arise is evidence of the parties’ intent to be legally bound. For example, in the Italian case mentioned above, the court was concerned with finding evidence that the charterers in fact agreed to give up a right to go to court in favour of arbitration.  The language used in this sub-clause is meant to give an electronic signature the same weight in respect of evidence on the issue of intent as a physical or hand-written signature.  Sub-clause (c) recognizes that this may not be sufficient in jurisdictions that are sceptical to or simply do not recognize electronic signatures.  Thus, the sub-clause obliges the parties to promptly provide a handwritten signature on any relevant document on request.

Although this provision may be difficult to enforce in cases where the parties are no longer on speaking terms, especially once arbitration or enforcement proceedings are commenced, it, together with sub-clause (b), may provide sufficient ammunition to a party seeking to enforce an agreement that both parties wished to be legally bound at the time they entered into the contract.

The electronic signature clause, which was published by BIMCO in late 2021, is designed to be used in any contract, including charterparties and other shipping documents such as letters of indemnity and bills of lading.  We hope that it will lead to contracts being signed more frequently, so as to potentially avoid the enforcement issues as we encountered above. Whether courts in jurisdictions requiring a signed arbitration agreement will view the electronic signature as sufficient remains to be seen, but the hope is that the new BIMCO clause will at the very least provide ammunition for parties attempting to enforce contractual agreements.

[1] Article II