The Need for Legal Regulation of Blockchain and Smart Contracts in the Shipping Industry

Abstract

The paper analyzes the potential impact of blockchain technology and smart contracts on the shipping industry. As the shipping industry represents a complex system of various actions that have to be controlled and registered, blockchain technology could serve as a tool to allow the streamlining of numerous processes, whilst at the same time taking the human factor out of multiple elements where trust between involved parties is an issue. The authors therefore first present how blockchain technology works and what smart contracts are, in order to give an  insight into their applicability in the shipping sector. After a general overview of the technological and legal characteristics of blockchain technology and smart contracts, the authors present examples of relevant subjects, relations, and contracts in the shipping industry. Based on the charter party, a key contract in the shipping industry, the authors present the existing problems which could potentially be solved using blockchain technology. Besides the benefits of blockchain technologies, the authors furthermore point out the existing deficiencies that still make blockchain technology hard to apply in legal relations within the shipping industry. Based on these insights, the authors highlight the current developments in this area and present the existing and expected regulatory reforms of blockchain solutions and smart contracts within the European Union.