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Maritime Arbitration – Wet Disputes


Jagan - May 31, 2022 - 1 comment

  1. Dry shipping disputes generally relate to contractual breaches with respect to charter partiesi, contracts of carriage, sale & purchase and insurance/reinsurance contracts etc. whereas Wet shipping disputes relate to accidents at sea such as collisions, general average, salvage etc. The main difference is that Dry shipping disputes are contractual whereas Wet shipping disputes are generally bereft of any contract and are generally Tortii based. Given that Wet disputes generally arise without any contract, the opportunity for arbitrationiii as a dispute resolution process is limited. This article will argue that perhaps the time is right for a change for Wet disputes to be arbitrated.
  2. The question must therefore be as to whether Arbitration is indeed suited for Wet disputes and if so, the procedure to ensure that these are arbitrated instead of litigated.
    1. As Wet disputes are generally bereft of contract, parties would, as and when an issue arise, consider the best jurisdiction available to pursue the other party. If there is no contractual provisioniv, say as is provided for salvage conducted on Lloyds Open Form, then the option would be to pursue at a jurisdiction where parties are able to foundv jurisdiction to deal with the matter.
    2. In our view, the main duty of any national court is to provide succor to the society at large. By society, we mean the persons both living and artificial seated in that specific jurisdiction. Given that wet matters may involve parties foreign to the jurisdiction, the question is whether this should be heard in the courts? Some jurisdictions are happy to hear such matters as this is a source of revenue generation to the state. We submit that unless the incident occurred within the territorial waters of the state hearing the matter, it is not appropriate for the court to hear the matter. This is because any court will deal with the issue using the processes available within their law and which may well be alien to the location where the incident occurred. Instead, it would be more appropriate to consider the law of the place where the tort/causevi was committed or arose and which could be easily accomplished by Arbitration given the flexibility available in this process. We say this because arbitrators engaged could be chosen for their specific expertise and which coupled with the flexible arbitral processes could result in better “justice”.
    3. Most jurisdictions, such as Singapore and England & Wales, have provided for the use of ADR within the pre-trial civil justice process i.e., the parties are encouraged to consider ADR processes such as Arbitration or Mediation and should a party be unwilling to consider these processes, the courts could impose cost sanctions against them. This being the case, if an arbitration process is indeed available to deal with Wet disputes, parties will be duty bound to consider this as a part of their pre-action protocol and may choose arbitration after having founded jurisdiction.
    4. Given that Wet disputes deal with various types of disputes, we consider the main ones below:
      1. Salvage: The main two arbitration rules available for Salvage are of the Lloyd’s Salvage Arbitration Clauses which is provided in the Lloyds Open Form, the latest edition being of 2020 and the Salvage Arbitration Rules of the Society of Maritime Arbitrators, New York. Lloyd’s had initially announced in April 2021 vii that it was considering closing its Salvage Arbitration Branch and which would have severely impacted the LOF. Following representations, Lloyd’s subsequently confirmed that it would continue to operate both the Lloyds Salvage Arbitration Branch and the LOF. While this has been indeed welcomed by the industry, we believe that the industry should consider having more institutions/rules for salvage arbitrations and perhaps, this could be accomplished geographically.  In this way, hopefully, salvage arbitrations will continue to be the preferred choice and together with competition, would also develop the processes further.
      2. General Average: Although General Average arises by operation of law, the fact is that invariably, the contracts for and of carriage  provide for the General Average to be adjusted contractually based on the York Antwerp Rules (“YAR” – the most commonly used version being of 1994). Given the above, if there is a provision in the YAR for GA claims to be dealt by Arbitration, then parties involved in the GA would have to arbitrate instead of litigate. Accordingly, as and when the YAR comes forth for revision, stake holders should consider whether a new rule can be included to deal with dispute resolution process. In the meantime, parties can provide in their contracts (C/P and BL’s) for GA disputes to be arbitrated on the basis of LMAA, SCMA, SMA and any other available Rules.
      3. Collision: With respect to collisions, the Singapore Chamber of Maritime Arbitration (“SCMA”), had earlier formulated Rules for the Expedited Arbitral Determination of Collision Claims (SEADOCC). We are not aware of any other arbitral institution who have formulated rules to deal with collisions. We believe that the SCMA SEADOCC could, if required, be amended to provide for other juridical seats and laws so as to allow for increased use of these rules.
  1. The way forward:
    1. While most of the Wet disputes are invariably pursued through the courts, we submit that this (court process) is not the best given that the process may be alien to some of the parties and further may be chosen for tactical advantages.
    2. In order to ensure fairness and transparency in the dispute resolution process, it would be best for Wet disputes to be arbitrated.
    3. To deal with the potential increase in Wet arbitrations, arbitral institutions and associations should formulate rules to assist in dealing with such disputes. This may lead to disputes being dealt more nearer to the location where the incident occurred and which in turn would result in reduced costs, time, and more sensitivity to the local practices.
    4. Finally, having more Rules / Jurisdictions available to deal with Wet disputes would lead to more choices to the users and this should promote healthy competition leading to further developments in the arbitral processes.

i.  A charterparty is a “contract for carriage” – see The TORENIA [1983] 2 Lloyd’s Rep. 210
ii. See Tort – Wikipedia
iii. Arbitration is a creature of the contract i.e., it should be provided in the contract for arbitration to be the dispute resolution process.
iv. If salvage is conducted on LOF terms, then they provide for arbitration (Lloyd’s Salvage Arbitration Clauses 2020) and which allow for the reward to be decided by arbitration.
v. See https://www.judiciary.gov.sg/civil/admiralty-proceedings-(from-1-april-2022)/admiralty with respect to Admiralty jurisdiction of the Singapore courts.
vi. Lex loci delicti commissi
vii.See article by Kennedy’s and which can be viewed at https://kennedyslaw.com/thought-leadership/article/is-lloyds-open-form-on-borrowed-time/

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1 comment

  1. Dr.Sasikumar P.V

    Dear Jagan sab, I fully agree with your views on bringing the wet disputes also under arbitration including collision claims. Collisions issues are complex in nature as the issues involves damage to each of the vessels, general average, salvage, damage to cargo, security and limitation of liability etc. When assessing fault in collision claims, courts have traditionally been guided by a widely accepted set of international rules for the conduct of vessels at sea ie., COLREG,1972. These Rules are applicable to all vessels upon the high seas and in all waters connected therewith and basically not intended or designed for establishing liability, fault or damages, and the breach of these rules, nevertheless, leads to most cases to the finding of fault or negligence. As you said, SCMA has formulated SEADOCC rules and I happened to read an article presented in the Nineteenth International Congress of Maritime Arbitrators Hong Kong, 11th to 15th May 2015 by Hakirat S. H. Singh titled “A Fusion of Principles and Rules: Expedited Arbitral Determination of Collision Claims and its Potential Application in Cases involving Ships Crossing the Singapore Straits “. In India, as you may be aware, only ICI has formulated and published proper rules for Maritime Arbitration applicable to all marine disputes covering: 1. Interpretation of charterparty, any contract of affreightment and bills of lading; 2. Carriage of goods by sea; 3. Marine salvage, towage of vessels or other floating objects; 4. Damages arising out of collisions, groundings, fire or any such accidents whether in port or at sea, including damage to fix or floating objects at ports; 5. Interpretation of any shipping documents; 6. Ownership of vessels and aspects relation to lines and mortgages; 7. General Average, particular average and matters arising out of contracts of marine insurance; 8. Wreck removal and marine pollution; 9. Disputes relating to other matters connected with shipping and not mentioned above.
    In India, as the coastal shipping is coming up consequent to liberalized schemes envisaged in Sagarmala projects, there is definitely going to be more scope for marine arbitrations.

    Wishing you all the best and with kind regards.

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