Article - August 28, 2019

Tips on Maritime Disputes and Arbitration from a Barrister

shipping industry arbitration

For the shipping industry, arbitration is different than how many often think of it. While companies may imagine arbitration to be formal and burdensome—hearings, advocates, procedure—in reality, the vast majority of maritime arbitration can be managed from your desk, by email, and with the help of the right specialists (experts and maritime lawyers).

Exact statistics are unavailable because arbitration is private and confidential, but the proportion of disputes resolved without the need for a physical meeting or hearing is likely over 90 percent. In a high proportion of cases, the two arbitrators appointed by the parties reach a shared decision, without needing to appoint a third arbitrator.

London- and Singapore-based international arbitration barrister, Simon C. Milnes says this is just one reason why arbitration is seen as a normal part of commercial life in the shipping industry. In shipping, disputes are fairly routine but do not usually signify the end of the parties’ commercial relationship. The parties need an efficient and fair way to resolve where liability falls in order to continue their main commercial business. According to Milnes, “Arbitration is simply a way to resolve the many differences of opinion that are bound to occur. Arbitrators are also not viewed as outsiders in shipping. They are an integral part of the industry.”

Arbitrators often come from within the shipping industry as experienced shipowners, technical managers, brokers and lawyers with decades of specialist maritime experience. Because they know the business, they can quickly get to the point and ask the right questions. Using insiders as arbitrators has kept arbitration rapid, focused and cheap—a stark contrast to much of what happens with international arbitration in other sectors.

Milnes shares these general tips for successful maritime arbitration:

  1. Be prepared for the arbitration to move fast. Delaying tactics have a very limited shelf-life. They can also undermine how your overall case will come across. It’s much more effective to focus on the real disputed issues and identify your best case early on.

  2. Within your company, ensure the message goes out from the top to help the legal team gather the information and documents they need to fight the case. To meet the arbitration timetables, you need to quickly find and organize the documents that your lawyers (in-house or external) deem necessary. This is an extra burden that falls outside the main “job description” of people handling the commercial side, but it can be crucial to the company’s chances of recovering monies owed or avoiding a hefty award against it.

  3. Make use of lawyers qualified in the applicable law to identify what is most relevant. Milnes says he has come across numerous examples—including in Asia—of commercial parties arguing points that simply don’t work, based on a misunderstanding of what the law is and what the law considers relevant. Let your lawyers handle this area.

  4. When deciding what case to run in the arbitration, be realistic. Cases based on truth are far more successful than those that avoid/deny the facts. Conceding bad arguments and focusing on your best points is a powerful tactic.

  5. When considering which arbitrator to appoint, choose someone who is (1) on top of the issues, and (2) neutral and fair. Arbitration is a “horses for courses” deal, Milnes explains. In a technical arbitration that is all about the causes of an engine failure, a consulting expert who has served as a chief engineer would be a good choice; but if the case is about the meaning of a charterparty clause, then an arbitrator with legal training is preferable. Biased arbitrators are not helpful. Milnes advises, “From seeing, regrettably, a good few examples where an arbitrator had an agenda and was trying to help out one side, it was clear that that arbitrator’s views carried no weight with the other members of the tribunal. Anything they said would be viewed with suspicion.”

  6. Never underestimate the power of commercial merit. Although a good legal analysis is absolutely essential, it also pays to convince the tribunal that your side has the most “commercially reasonable” position. Arbitrators and judges work to ensure the law develops in harmony with common sense and business ethics. This is especially true in shipping where arbitrators are trade insiders and genuinely care about serving the industry. If a tribunal wants to find in your favor because you handled matters in the way they would expect of a reasonable business-person in that position, they usually will.

Maritime arbitration grew from the industry, specifically in London, which has been a center for trading, ship-owning, insurance (hull, P&I and defense), and other services since the 1800s. Today, consulting experts investigate maritime incidents and provide expert evidence to tribunals on speed and consumption, ship operations, cargo damage, etc. These experts are a vital part of the cluster of service providers assisting the industry.

There is a huge advantage in having disputes resolved within this ecosystem with reputable experts, arbitrators—not to mention commercial judges who are deeply familiar with the issues that shipping faces. Today, London arbitration serves both the shipping and seaborne commodity trades on a worldwide basis.

The London Maritime Arbitrators Association (LMAA) has rules that allow experienced tribunals great flexibility in controlling the procedure. Maintaining control helps to keep arbitration speedy and focused on the crucial issues. LMAA arbitrators are not shy in using their powers to prevent lengthy or repetitive submissions and to limit expert evidence to what is truly relevant. The LMAA has created a basic timetable for submissions and guidance for the rest of the procedure but a tribunal is free to adjust the procedure, including the timetable, in order to speed up the process. Milnes says this happens frequently. Furthermore, when two or more cases are found to have connected facts, for example a chain of charterparties, LMAA tribunals are willing to consolidate arbitration or have the evidence presented concurrently.

As a result, says Milnes, “Your typical London maritime arbitration costs less than half that of a typical commercial arbitration due to this strict focus on managing cases to avoid wasting time and costs.”