PAY ATTENTION TO THE DISPUTE RESOLUTION CLAUSE
On many occasions, we have seen contracting parties dive into deals without giving much consideration to the dispute resolution clause contained in the contract. The clause, like any contractual clause, is cast in stone, and cannot be changed when a dispute arises, just because it has been deemed unreasonable or inconvenient at the time action needs to be taken. It is as firm a clause as the price, or date of delivery, or place of delivery.
MEDIATION – CONSIDERATIONS
Many contacts these days call for mediation prior to arbitration. It is important to note that where you have a clause of this nature, arbitration cannot be commenced unless a genuine attempt at mediation has first been made. Failing to do so could mean a lack of jurisdiction to arbitrate, and any purported commencement of arbitration would be wrongful.
Mediation, unlike arbitration, is not adjudicated upon by a third party. This means that the mediator will not make a finding of who is right or wrong. The process is consensual and the mediator will try to facilitate a settlement of the dispute by steering the parties to a mutually acceptable solution. The “settlement” will then have to be embodied in an agreement, signed by the parties, and usually witnessed by the mediator. Failing to honor the terms of the settlement will throw up what many regard as the undesirable aspect of mediation – action will have to be commenced against the defaulting party, with the innocent party framing a new action based on a breach of the settlement agreement.
ARBITRATION – CONSIDERATIONS
By contrast, an arbitration is born out of an agreement to oust the jurisdiction of the court, and replace it with a private resolution process either on an ad hoc basis or under the auspices of an arbitration institution like the ICC. The arbitrator is effectively a judge who will make a finding of who is right and who is wrong. His finding is then embodied in an “Award”, which is akin to a judgement, but not quite. The award, without more, does not give the winning party the right to execute or enforce it against the losing party, unless it is brought before the courts and converted to a judgement. Thereafter, it will have the same force as a judgement of the court, entitling the winning party to enforce the award/judgement against the losing party. To say that we have simplified things in this explanation would be an understatement! However, we hope the concept is clear.
LITIGATION – CONSIDERATIONS
Lastly litigation is the process of resolving disputes before the courts. It leads to claims being filed in the court and judges hearing and deciding cases in trials. Where a contract provides for arbitration, the jurisdiction of the courts are ousted, and one, generally speaking, cannot seek the assistance of the court in the dispute. The process is also more formal than arbitrations, and the one big difference is that arbitrations are private and confidential, whereas court proceeding generally attract the full glare of publicity. Anything transpiring in an arbitration cannot be made public.
THE MARITIME INDUSTRY PREFERS DISPUTES TO BE RESOLVED BY INDUSTRY EXPERTS
A final point to remember is that in an arbitration parties usually have the benefit of an adjudicator who is familiar with the commercial issues or area of law in dispute. The arbitrator is usually well versed in the area, and generally recognized as such by the industry. While Judges are obviously very intellectually robust and capable of appreciating industry nuances very quickly, they are usually not specialists and do not have the benefit of repeatedly dealing with issues in the same area. It is an accepted fact that the maritime industry generally prefers to refer disputes to arbitration, and in many instances, for the very reason that they prefer disputes decided by respected industry specialists.
At Maritime Partners we have the expertise to manage large and complex disputes by planning strategy and working with legal firms that best fit the task. We also have on hand an experienced maritime arbitrator whom you can consider for appointment in suitable cases. Details can be provided on request.
Maritime Partners is an independent advisory firm founded by partners with diverse maritime background and network.
We have extensive experience in Strategy, Operations, Shipowning, Finance and Risk Management through senior management positions with leading global and regional maritime companies and maritime start-ups.
We advise our Clients on strategic, financial, operational, organisational and risk issues, leveraging our industry expertise and using analytical rigor. Our aim is to help our Clients to make better decisions and meet their objectives earlier or better. Also, we are committed to take execution roles in our Client’s Company if required by the Client in order to achieve the desired results.
Our Clients include listed and private companies in the shipping & logistics industry, investors, financial institutions, P&I/underwriters and governments globally.