i-law

Voyage Charters

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Chapter 63

Arbitration

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24. ARBITRATION. Any and all differences and disputes of whatsoever nature arising out of this Charter shall be put to arbitration in the City of New York or in the City of London whichever place is specified in Part I of this charter pursuant to the laws relating to arbitration there in force, before a board of three persons, consisting of one arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen. The decision of any two of the three on any point or points shall be final. Either party hereto may call for such arbitration by service upon any officer of the other, wherever he may be found, of a written notice specifying the name and address of the arbitrator chosen by the first moving party and a brief description of the disputes or differences which such party desires to put to arbitration. If the other party shall not, by notice served upon an officer of the first moving party within twenty days of the service of such first notice, appoint its arbitrator to arbitrate the dispute or differences specified, then the first moving party shall have the right without further notice to appoint a second arbitrator, who shall be a disinterested person with precisely the same force and effect as if said second arbitrator has been appointed by the other party. In the event that the two arbitrators fail to appoint a third arbitrator within twenty days of the appointment of the second arbitrator, either arbitrator may apply to a Judge of any court of maritime jurisdiction in the city abovementioned for the appointment of a third arbitrator, and the appointment of such arbitrator by such Judge on such application shall have precisely the same force and effect as if such arbitrator has been appointed by the two arbitrators. Until such time as the arbitrators finally close the hearings either party shall have the right by written notice served on the arbitrators and on an officer of the other party to specify further disputes or differences under this Charter for hearing and determination. Awards made in pursuance to this clause may include costs, including a reasonable allowance for attorney’s fees, and judgement may be entered upon any award made hereunder in any Court having jurisdiction in the premises.

“all differences and disputes of whatsoever nature arising out of this Charter”

63.1 Arbitration agreements are separable from the contracts in which they are located and they survive, for example, the frustration or other termination of the main contract.2 The wording of the relevant arbitration agreement is important in order to discern the precise ambit of the disputes which are to be referred to arbitration, but the modern approach starts with the strong business assumption the parties are presumed to have intended to refer to arbitration all the disputes arising out of this particular transaction and not to have different sets of

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proceedings before different tribunals.3 There is nowadays probably no material distinction to be made between the width/scope of phrases such as “in connection with”, “arising under”, “in relation to”, “arising out of”: all will be construed very broadly.4 Thus, the present clause may safely be said to include disputes and differences about the following matters:
  • (1) what the terms of the charter are, and whether the parties’ rights thereunder have been affected by waiver or estoppel;5
  • (2) whether the charter should be rectified;6
  • (3) whether the charter was induced by misrepresentation7 and claims for damages under the Misrepresentation Act;8
  • (4) construction of the terms of the charter;9
  • (5) whether the charter has been varied or replaced by a fresh charter;10
  • (6) disputes relating to general average;11
  • (7) whether the charter has been terminated by accepted repudiation;12
  • (8) whether the charter has been frustrated, and financial claims consequent upon frustration;13
  • (9) disputes about supervening illegality14 and even initial illegality;15
  • (10) claims for breach of duty and bailment, at least where the basis is dependent on the existence of the charter;16 and
  • (11) disputes about the validity of the contract, whether on the grounds that it was procured by fraud, bribery, misrepresentation or anything else.17
In The Four Island,18 it was held that the tribunal had jurisdiction to decide whether parties had reached an agreed settlement in relation to demurrage liability. 63.2 The reference of disputes or differences to arbitration rather than to the courts is compulsory and, pursuant to section 9 of the Arbitration Act 1996, the English courts will stay judicial proceedings when the claim is properly arbitrable.19 Prior to the coming into force of the Act, in cases where the courts considered that there were no seriously arguable grounds for resisting a claim, a stay of legal proceedings would be refused and summary judgment granted. Slight but important differences between the language of the 1996 Act and that of the previous legislation mean that this approach is no longer adopted, and any claim which falls

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within the subsequent words of the clause must be pursued in and only in arbitration, however weak or non-existent the grounds for resisting it.20

“the City of New York or in the City of London, whichever place is specified in Part I”

63.3 The choice of London or New York will not only determine the law governing the arbitration, it is also a strong pointer to the law governing the charterparty as a whole.21 It might be argued that the failure to complete the relevant section of Part I by striking out London or New York renders the arbitration clause unenforceable in its entirety,22 although the mere failure to indicate the seat of arbitration does not necessarily amount to a failure to agree that arbitration should be the dispute resolution mechanism. There may be indications in the terms or circumstances of the charter which indicate an inferred choice of arbitral seat even without specification in Part I. It may be questioned whether the failure to specify the seat in Part I gives the claimant the option as to the choice of the seat of arbitration proceedings by treating the words “whichever place is specified in Part I of this charter” as irrelevant in the absence of such specification. The commencement of judicial proceedings always remains a practicable possibility, although the respondent may apply for a stay of those proceedings thereby assuming the burden of proving the existence of a binding arbitration agreement; rectification of Part I to give effect to a prior, but unspecified, choice of arbitral seat could be a possibility in such proceedings. This issue may achieve particular importance where there is an imminent time bar and the claimant would be well-advised to commence proceedings in all possible tribunals.

Appointment of arbitrators

63.4 The provisions of the clause are largely self-explanatory, and are fairly generous to the respondent who is reluctant to proceed quickly with the arbitration. Under the ordinary rules of English law, the claimant may appoint his arbitrator as the sole arbitrator if the respondent fails to make his appointment within seven days of being called to do so. It has been held that, in order to comply with the provisions of the clause, the arbitrator chosen by the first moving party must have indicated his willingness to act,23 and presumably a similar requirement exists with regard to the appointment of the respondent’s arbitrator.

The right to submit further disputes

63.5 The clause gives either party the right to specify further disputes under the charter for determination by the same tribunal. This is a useful provision, since it prevents a party who wishes to delay from appointing a different arbitrator in respect of each separate dispute. The clause does not prevent the parties, if they so wish, from commencing separate arbitrations for separate disputes,24 but presumably, unless both parties have agreed, expressly or by conduct, to a separate arbitration, either party is entitled to have the dispute submitted to the original tribunal.

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Costs and attorneys' fees

63.6 See .

Entering judgment upon the award

63.7 Where the place of arbitration is London, the award may, with the leave of the High Court,25 be enforced as a judgment of the court under section 66 of the Arbitration Act 1996. Where the place of arbitration is New York, a similar enforcement procedure is available under Part III of the Act.

U.S. Law

63A.1 See Time Charters, paras 29A.1–29A.236. For a discussion of the advantages and disadvantages of this clause’s “self-executing mechanism” for the appointment of a panel, see Waterspring S.A. v. Trans Marketing Houston Inc.26 As to choice of forum, see The NCC Arar 27 in which inconsistencies between the charterparty and the charterer’s terms as to arbitration forum were decided in favor of New York, based on the fixture recap’s reference to two other vessels’ charterparties providing for New York arbitration. The clause also clearly permits the arbitrators, in their discretion, to award the prevailing party costs and attorneys’ fees, and panels in New York increasingly exercise this discretion.28 See also The Bow Lady,29 noting that the clause allows parties to specify further differences at any time before final closure of the proceedings. Arbitrators are empowered under Section 30 of the SMA Rules to set their own procedures and to make such orders as they deem “just and equitable.” Determining whether owner’s demand for alternative voyage orders was valid, will result in a likely savings in legal and arbitrators’ fees, narrow the issues, and will not compromise a fair disposition of the merits of the parties’ claims and counterclaims.30 63A.2 Also see above paragraphs 2A.27 et seq., Consolidation in arbitration; 2A.33 et seq., Participation of non-signatories in arbitration; and 2A.40 et seq., Consolidated class actions in arbitration.