Model Arbitration Clauses

1. Arbitration is the preferred dispute resolution method for most shipping contracts such as Charterparties (“C/P”) and with clauses allowing choice to parties to choose both the seat of the arbitration and the rules such as LMAA/SCMA/HKMAG… to govern the procedure. The use of LMAA, SCMA, HKMAG and SMANY rules have become synonymous to the seat where they are based. However, the converse is not true. 
2. We recently came across a fixture note which incorporated an arbitration clause which provided for both the Law of the contract and the Seat – “Arbitration if any to be applied at Singapore under English law”. Given that parties have not specifically provided for the arbitration procedure such as those which can be found under the commonly used Rules for Maritime Arbitration (LMAA/SCMA/HKMAG/SMANY), on the occurrence of a dispute, parties would need to either agree on the process to be followed, say by using one of the Rules, or look at the law of the seat to assist in the conduct of the arbitration.  While the law of the seat will certainly assist parties, it may become a bit more cumbersome compared to when one of the commonly used Rules are incorporated in the arbitration clause. The purpose of this article is to high light some of these issues and which as below:
   1. Commencement:
   2. Number of arbitrators
   3. Appointment of arbitrator/s
   4. Procedure
   5. Low Value Claims
      We will touch on these aspects briefly considering the arbitration clause mentioned above.
3. Commencement of arbitration: This may sometimes be important to ensure that the claim does not become time barred (e.g. if the Hague or Hague Visby Rules are incorporated into the contract, then the time allowed for cargo claims is 1 yearⁱ from the date of delivery or the date when the delivery would have been effected).
   1. The International Arbitration Act of Singapore incorporates the Model Lawⁱⁱ on International Commercial Arbitration. Article 21 of the Model law provides for the arbitration to “… commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.” Accordingly, as and when a request of arbitration is made by the claimants, the date of commencement would be on the date when it was received by the respondent.
   2. If the SCMA Rules were incorporated, the commencement would be basis Rule 6.1 which provides for the notice to include various points including a brief statement of the claim together with the name/ contact details of a nominated/party appointed arbitrator (if the appointment is for a sole arbitrator or a panel of 3 arbitrators).
4. Number of arbitrators:
   1. If parties had agreed on the number of arbitrators to hear their dispute in the arbitration clause, then parties would be bound by this agreement. However, if the arbitration clause is silent, then parties would have to look at the law of the seat. In this case, S 9 of the Singapore International Arbitration Act provides for the appointment of a single arbitratorⁱⁱⁱ if parties had not expressly provided for this in the arbitration clause.
   2. If the SCMA Rules^iv were provided to govern the procedure, then basis Rule 8, the number of arbitrators would be three except that in the case of Expedited procedure^v, it would be a single arbitrator.
5. Appointment of arbitrator/s:
   1. If parties are unable to reach an agreement on the arbitrator to be appointed, they would need to approach SIAC^vi as the appointment authority to appoint the arbitrator. The fees applicable for the appointment services are listed in SIAC’s website and which ranges from SGD 3,000 + GST (if applicable) for a single arbitrator to SGD 5,000 + GST (if applicable) for a three-member panel of arbitrators.
   2. If the SCMA Rules were provided, then the fees for appointment by the SCMA Chairperson would be SGD 1,500 per arbitrator.
6. Procedure:
   1. Article 19 of the Model Law and which forms a part of the Singapore International Arbitration Act provides that parties are free to agree on the procedure to be followed and failing such agreement, the arbitral tribunal would be entitled to conduct the arbitration as it considers appropriate i.e. the tribunal would be the master of the procedure.
   2. If the SCMA Rules were incorporated, then the procedure is listed in the Rules including Service of Case Statements, Defence and Counterclaim, if any^vii.
7. Low Value Claims:
   1. The Singapore International Arbitration Act does not have any specific provisions for the conduct of low value claims. This being the case, it may not make economic sense to pursue claims in certain circumstances.
   2. The SCMA Rules has a specific provision which allows claims upto USD 300,000^viii to be conducted based on the expedited procedure (abridged timelines, submissions and capped costs both for Tribunal and cost awards) and which is provided in Rule 44. Accordingly, it may make sense to also pursue valid low value claims.
8. Conclusion:
   1. The use of the widely used maritime arbitration Rules would aid in the conduct of the arbitration. This is because the Rules are made after wide consultation with the industry at large keeping in mind the various issues which may arise during the arbitration (and are updated regularly).
   2. All of the Arbitral Institutions/Associations have published their model arbitration clause for the easy incorporation of their rules. 
   3. In the example above, if the Respondent chooses to be non-responsive, the Claimants will have to necessarily approach the Appointment authority for the appointment of an arbitrator and then await the Arbitrators direction on the procedure to be followed. This could all be avoided, say by using a Model Arbitration Clause of SCMA,  LMAA, HKMAG or SMANY.

^i. See Art 3 Rule 6 of the Hague / Hague Visby Rules.
^ii.The Hong Kong Arbitration Ordinance has similar provisions as Singapore given that they have incorporated the model law. The English Arbitration Act 1996 has other provision in S 14 and which provide for the commencement when a party serves a notice on the other party to appoint an arbitrator or agree to the appointment of an arbitrator.
^iii. The provisions of the English Arbitration Act 1996 (S15(3)) are similar i.e. single arbitrator if parties have not agreed on the number of arbitrators.
^iv.The LMAA Rules has a provision that in a party fails to appoint an arbitrator as provided in the arbitration clause, then the other party may appoint their arbitrator to act as the sole arbitrator (See S10 of the LMAA Terms 2021).
^v. See Rule 44 of the SCMA Arbitration Rules (IVth Edition).
^vi. See S 8(2) of the Singapore International Arbitration Act.
^vii. See Rule 18 and Rule 44 (in case of the Expedited Procedure) of the SCMA Arbitration Rules (IVth Edition).
^viii. Similar provisions also exist in the LMAA Rules – the Small Claims Procedure and the Intermediate Claims Procedure, HKMAG – the Small Claims Procedure,  Society of Maritime Arbitrators of New York – Shortened Arbitration Procedure.