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Arbitration Clause in Liner Bills of Lading – is it workable?


Jagan - July 31, 2018 - 2 comments

  1. While we remain convinced of the advantages of the use of Arbitration Clauses in Liner Bills of Lading to deal with disputes, there is some skepticism as to whether an arbitration clause in a Liner Bill of Lading is indeed workable.
  2. We have reviewed the Bills of Lading issued by various Main Line Operators and note that they generally provide for a Law and Jurisdiction clause (they do not include any arbitration clause). In particular, we reviewed the Top 5 Container Lines1and note that they provide for various jurisdictions to deal with disputes such as the English High Court (Maersk and MSC except for US Trades)2, Tribunal de Commerce de Marseille, France (CMA)3, Shanghai or other Maritime Court in the People’s Republic of China (COSCO)4and the Hamburg Courts, Germany (Hapag Lloyd)5. In addition, our review of the various BIMCO Liner forms reveal that these Bills of Lading only provide for a Law and Jurisdiction Clause (Conline 2016 – Clause 4, Linewaybill 2016 – Clause 3, Multidoc 2016 – Clause 5).
  3. With respect to the regional trades, we have come across Bills of Lading which provide for Arbitration to deal with disputes. They have been judicially tested and have been found workable in various jurisdictions. However, parties may challenge the application of the arbitration clause given that one of the parties may not be the original party6(subsequent party in the contract of sale) or due to rights which may be available under the local legislation.
  4. In order for an Arbitration Clause to be workable in a Liner Bill of Lading, it must be effective and not fall foul of the applicable legislation in either the country where the dispute is being pursued i.e. the seat or where the award will be enforced. It therefore appears to us that the arbitration clause should be “free-standing” (allowing parties the freedom of choice of the seat)7. What comes to our mind is something akin to what has been propounded in Art 66 (a) of the Rotterdam Rulesto allow a party (cargo interests) to initiate judicial proceedings against the carrier at various forums as below

    1. At the domicile of the carrier;
    2. The place of receipt agreed in the contract of carriage;
    3. The place of delivery agreed in the contract of carriage; or
    4. The port where the goods are initially loaded on a ship or the port where the goods are finally discharged from a ship

      The Rotterdam Rules however does not appear to have any express provisions for the pursuit by carriers. Accordingly, we would suggest that the arbitration clause should permit the carrier to pursue the contractual party (shipper or consignee), either at their domicile (where they have a presence) or the place of delivery agreed in the contract of carriage.
  5. In comparison to other maritime disputes, Liner Disputes are generally for lower sums say within USD 100,000 or so. However, there are odd disputes, and which may indeed be for astronomical amounts. Given the quantum’s in question, liner disputes may not be of much interest to various arbitral associations / institutions. However, association / institutions should consider involvement in these disputes as this would not only allow their young arbitrators an opportunity to earn their spurs but also that they would be assisting parties in dealing with disputes in the most practical and cost effective way. We would therefore suggest that arbitral associations and institutions focusing on maritime arbitrations such as LMAA, SCMA, EMAC, SMANY and TAMARA to consider this as one of their projects and perhaps work together to draft an arbitration clause workable and enforceable in all jurisdictions. The advantage of a multitude of associations / institutions working on such a project would be that there would not only be a cross fertilization of ideas but that the association / institution nearest to the seat of the arbitration could take the lead in assisting the conduct of arbitration (for instance, if parties are unable to agree on the arbitrators, then they can approach the association / institution for assistance and which would certainly be faster and cheaper than seeking assistance from  the courts in the seat of the arbitration).
  6. In conclusion, while we remain convinced that arbitration is one of the most effective ways to deal with Liner Disputes,  it is still a “work in progress”.

1.https://alphaliner.axsmarine.com/PublicTop100/

2. Cl 26 of the Maersk Bills of Lading Terms and Conditions & Cl 10.3 of the MSC Bills of Lading Terms and Conditions

3. Cl 30 & 31 of CMA Bills of Lading Terms and Conditions;

4. Cl 26 of COSCO Bills of Lading Terms and Conditions;

5. Cl 25 of Hapag Lloyd Bills of Lading Terms and Conditions.

6. See an English case update published by Mr Ananya Pratap Singh

7. See article published by Clyde & Co

8. Art 75 of the Rotterdam Rules allows use of arbitration only for volume contracts.

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2 comments

  1. Jeffrey Blum FICS FCIArb

    Thanks Jagan ~ another useful commentary on this important topic.
    One point: your other readers will surely be aware that the Rotterdam Rules are not yet in force, so any reliance on them should be treated with great caution…
    Best wishes, as ever
    Jeffrey

  2. […] See our earlier article on Arbitration Clause in Liner Bills of Lading – Is it workable? […]

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