- Disputes invariably arise in International business and which may be due to many factors including biases, different understanding of the facts, parties based at different jurisdictions including different legal systems i.e., common or civil lawi, etc. The shipping industry has traditionally graviated towards arbitration as a dispute resolution process given that parties can choose their own arbitrators well versed in shipping practices, use arbitration processes that that are not only quick but also cost effective together with the easy enforceability of awardsii. Additionally, arbitration does allow successful parties a chance to recover their costs and which may not be the case for litigationiii.
- The popular Rules in the maritime industry are those of the London Maritime Arbitrators Association (“LMAA”), the Society of Maritime Arbitrators of New York (“SMANY”) and the Singapore Chambers of Maritime Arbitration (“SCMA”). Keeping in line with the developments including the increasing use of video conferencing as a result of the Corona pandemic, both the LMAAiv and the SCMAv have updated their rules to ensure that the arbitration can still be conducted during these trying times.
- Following the implementation of the Singapore Multimodal Transport of Goods Act 2021 (“MGTA 21”), we had suggested to our Singaporean clients to consider incorporating an arbitration clausevi in their Bills of Lading, based on the SCMA model clause, given that the Singapore Act expressly allows for this, provided the arbitration is seated in Singapore. We believe that jurisdictions who have also implemented similar Multimodal Transport of Goods Act (as a consequence of being a ASEAN member state), would have similar provisions and therefore would suggest national industry bodies such as Federation of Malaysian Freight Forwarders (“FMFF”), Indonesian Forwarders Association (“DPP ALFI/ILFA”), Vietnam Freight Forwarders Association (“VIFFA), Thai International Freight Forwarder Association (“TIFFA”), Philippines International Freight Forwarder Association (“PISFA”), Brunei Freight Forwarders Association (“BRUFA”), Cambodian Freight Forwarder Association (“CAMFFA”) to consider publishing a model arbitration clause for their members to incorporate in their multimodal transport documents. The advantage of considering Rules of either LMAA or SCMA is that the model clauses, if required, can be modified to fulfill the “seat” requirements. Alternatively, the national forwarding associations can consider working with arbitration institutions based in their jurisdictions to develop a model clause for use by their members.
- The question one needs to ask is whether Arbitration remains the best way to deal with disputes? Our view is that it would all depend on various factors including the quantum of the claim, the jurisdiction where parties are based, whether parties have an ongoing continuing relationship, etc. In this regard, Mediation is a dispute resolution process which is now coming to fore, particularly after the Singapore Mediation Convention, and which tries to find common ground to resolve disputes, invariably, at a fraction of costs incurred by other dispute resolution processes. Additionally, even if Arbitration is the dispute resolution process chosen, parties, should they so desire, could seek to stay the arbitration proceedings (which may have been initiated to say preserve time) and then proceed to mediation to try and resolve their disputes. In fact, the SCMA Rules do have an ARB/MED/ARB protocol to cater to this eventuality.
- Small Claims Disputes:
- Both the LMAA and the SCMA Rules provide for expedited procedures to deal with small claims (LMAA provides for a limit of USD 50,000 whereas the updated rules of SCMA provides for a limit of USD 300,000 under their expedited procedure). The advantage of using these processes is capped costs for both the arbitrators fees and the other party’s costs applicable to a loosing party.
- Small Claims Tribunal:
- Some jurisdictions also have a Small Claims Tribunal (“SCT”)vii under their judicial system. For instance, Singapore has the SCT, and which can hear claims for a sum not exceeding SGD 20,000 (approx. USD 14,842) and which can, by agreement, be extended to SGD 30,000 (approx. USD 22,263).
- In the SCT, Parties would generally have to be represented by themselves ( no legal representation is generally allowed). In the Singapore context, parties first attend a mediation provided at the SCT and if parties fails to reach a settlement, they then proceed to present / defend their case in front of a judge and who will adjudge the matter.
- Given that the parties are dealing the claim by themselves, the costs involved are minimal. It would be preferrable to use this route for small claims up to SGD 20,000 and which may be increased to SGD 30,000 by agreement, say by a provision in the contract. Ideally, disputes which should be considered for this route should be where there are limited issues to be dealt with, say the other party is simply being recalcitrant in not making payment of invoices.
- In order to pursue a case under the court process, both parties have to either be within the jurisdiction of the court or voluntarily accede to accept the jurisdiction of the chosen courts (unless the jurisdiction has extra-territorial force) . This being the case, the SCT route may not be workable when parties are based in different jurisdictions. Additionally, the jurisdiction of the SCT / courts could be ousted on the basis of both the Domestic Arbitration Actviii/International Arbitration Actix and which entitles a party to a stay on the basis of a valid arbitration clause incorporated in their contract. This being the case, it may be preferrable to consider a tiered dispute resolution clause providing for SCT for claims up to SGD 30,000 and then proceeding with Arbitration say under SCMA Rules together with the expedited procedure for claims below USD 300,000.00.
- While businesses naturally do not want Disputes to occur, they do arise due to factors which are detailed in 1 above. Accordingly, it would be best to manage them and consider a DR process taking into consideration where the parties are based i.e. in the same or different jurisdictions. In this regard, it appears to us that the most appropriate process would be an Arbitration process which does provide for mediation, if parties are inclined to consider this, together with an option for using the SCT up to the claim limits allowed provided parties are based in the same jurisdiction.
i. The differences between Civil and Common law can be read at Civil Law vs Common Law – Difference and Comparison | Diffen
ii. In Common Law jurisdictions, Costs generally follow the event i.e. although the successful party is entitled to recovery of costs, the amounts recovered do not cover all of the costs incurred and therefore the successful party would have to incur some costs for recovery. See a helpful commentary on the recovery of costs which can be viewed at https://www.canlii.org/en/commentary/doc/2011CanLIIDocs336#!fragment/zoupio-_Toc3Page11/BQCwhgziBcwMYgK4DsDWszIQewE4BUBTADwBdoAvbRABwEtsBaAfX2zgGYAFMAc0ICMAgJQAaZNlKEIARUSFcAT2gByFaIiEwuBHIXK1GrTpABlPKQBCygEoBRADJ2AagEEAcgGE7o0mABG0KTswsJAA
iii.The New York Convention » New York Convention
iv.The LMAA last updated its rules in 2021.
v. SCMA recently updated its rules after having conducted an industry wise consultation. They recently conducted a webinar in which the speakers spoke on the changes. The webinar can be viewed at SCMA Rules 4th Edition Webinar – YouTube
vi. The contract evidenced by this Bill of Lading / Multimodal Transport Document shall exclusively be governed by English Law. Any and all disputes/differences arising out of this contract and/or connection with the interpretation of any of its clauses shall be settled by arbitration in Singapore in accordance with the Singapore International Arbitration Act (Chapter 143a). The arbitration shall be conducted in accordance with the Arbitration Rules of the Singapore Chamber of Maritime Arbitration (SCMA) current at the commencement of the arbitration, which rules are deemed to be incorporated by reference to this clause. Unless the claim and counter-claim exceeds USD300,000, the arbitration will be conducted in accordance with the SCMA Small Claims Procedure
vii. Malaysia has a similar SCT for claims below RM 5000, UK has a similar SCT for claims below GBP 10,000
viii. See S6 of the Singapore Arbitration Act 2001.
ix. See S6 & 7 of the Singapore International Arbitration Act 1994.
One problem with freight forwarders is the inconvenient jurisdiction clauses contained on the B/L terms. Main line terms with the large container companies usually require courts of an expensive inconvenient (for example – European) jurisdiction to adjudicate matters. This is unfeasible.
Similarly, on the other hand, smaller local NVOCCs who have claims for freight, or for Container Detention charges or for abandoned cargo etc., face similar problems.
In an enquiry I had yesterday, from an NVOCCs, his own Bill of Lading, negligently unknown to him contained a jurisdiction clause with words to the effect broadly – ‘to be agreed and appropriately inserted here’. This was from a standard template format which they had adopted, not read, and simply implemented as their Bill of Lading. There is also an impression that the Multi Modal Transport Document terms have been approved by the DG Shipping, and does not permit any amendments to that. In this background, the jurisdiction clause had not been modified.
While speaking in maritime forums, I advocated the need for an efficient arbitration system for the local NVOCCs. One way is for an existing trusted reputed international arbitration institution (such as SCMA or a domestic one preferably) to dedicate a cost effective branch to deal with this body of claims. For that, the arbitration should preferably be seated in India itself, to permit these claims to be quickly adjudicated and enforced and executed here, rather than having a foreign award. Would recommend that somebody with your stature, network and experience take this up more seriously. We see many cases of genuine but small outstanding claims abandoned by local NVOCCs because of the unwillingness to have to fight these through in a local jurisdiction elsewhere within India. Perhaps, an online dispute resolution mechanism portal, handled by a few trusted seasoned container industry hands would be useful.
ASHWIN SHANKER, Advocate & Arbitrator, LLM (Maritime Law) London
Chambers of George