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.
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.”
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