ARBITRATION.docx

ARBITRATION

    Many contracts with which shipowners and their masters are concerned, such as bills of lading,  charter-parties, salvage agreements, and maritime insurance policies, nowadays provide for various litigious matters to be referred to arbitration. Some of the terms used in connection with this settling of disputes, together with the main advantages and disadvantages of referring to arbitration, the various methods of referring to arbitration, and so on, form the subject matter of this page.    .

D E F I N I T I O N S

    Arbitration consists of the reference of a dispute to one or more independent persons for settlement, instead of in a court of law.

    The Arbitration Agreement is the agreement between the parties to refer the decision to one or more arbitrators.

    The Reference is the term which, strictly speaking, denotes the proceedings during arbitration, although the same term is often used to mean the submission.

    The Arbitrator is the person to whose decision the dispute is referred.

    The Award is the arbitrator's decision.

    The Umpire is a person appointed, when reference is to more than one arbitrator, to give a decision when the arbitrators fail to reach agreement.

    The Umpirage is the umpire's decision.

A D V A N T A G E S  O F  A R B I T R A T I O N

    Avoidance of Publicity. When a court action takes place the court is open to the public and the press so that the facts brought out in evidence become public property. Arbitration is conducted privately and the parties are under no obligation to publish information relating to the case.

    Informality of Procedure. Arbitration procedure is relatively simple though, naturally, it will vary according to the magnitude and complexity of the issue. In all cases it will be less formal than the fixed procedure of the courts.

    Possible Avoidance of the Uncertainty and Expense Involved in Appeals. Provided the arbitration award is good, the result is final and is not subject to appeal and attendent delays.

    Saving of Expense. The expenses of a legal action are generally heavy involving, as they do, court fees, attorney's costs, and fees of counsel. The last mentioned may be a particularly heavy item when it is considered necessary to brief highly experienced counsel, By comparison the remuneration of arbitrators will be generally much less.

    Arbitrators Special knowledge. In a dispute involving technical differences an arbitrator (almost without exception an experienced shipping man) having special knowledge of the business concerned may, with advantage, be appointed. In fact. most shipowners and charterers prefer a shipping man as an arbitrator to handle a relatively normal dispute, since, as mentioned aforesaid, a decision is arrived at much quicker and the expense is considerably less than going the court route.

D I S A D V A N T A G E S  O F  A R B I T R A T I O N

    Possibility of Arbitrator Being Incompetent or Biased. The appointment of a businessman might be a disadvantage on account of his not being well versed in the law, whilst the appointment of a lawyer might be unsatisfactory due to his lack of that special shipping and chartering knowledge and experience which the nature of the dispute requires. An arbitrator appointed by one party may be biased in favor of that party. If each side appoints its own arbitrator there is a risk that each will regard himself as the advocate of the party who appointed him. It is, of course, possible to eliminate or reduce such risks by nominating some independent person to appoint the arbitrator, and that is frequently done.

    An incompetent arbitrator may make a bad award which, on appeal to the court, may be set aside so that the time and money of the parties to the reference will heve been spent in vain. A competetent but biased arbitrator, on the other hand, may make a final and binding award which in fact is unjust.

P O S S I B I L I T Y  O F  I N J U S T I C E  A R I S I N G  F R O M  I N F O R M A L I T Y

    Informality of procedure has been included among the advantages attaching to arbitration, yet it is possible for it to operate to the the disadvantage of one or the other parties. Whereas the procedure obtaining in a court of law is rigidly defined, procedure in arbitration is, within certain limits, controlled at the discretion of the arbitrator. Misuse of such discretion could give rise to some injustice..

P E R S O N S  E N T I T L E D  T O  S U B M I T  TO  A R B I T R A T I O N

    Any person, individual or corporate, who is capable of entering into a contract can submit to arbitration. Persons incapable of contracting cannot be bound by a submission. A duly authorized agent may bind his principal by submission to arbitration, and in some cases an implied authority may arise from the nature of the agency.

S U B J E C T  M A T T E R  O F  R E F E R E N C E

    With certain exceptions, any matter that might be settled by action between the parties in a court of law may be referred to arbitration. Stated briefly, the exceptions are (1) purely criminal matters, since punishment of a crime can only be imposed in a court of law; (2) matters affecting status, such as suits for dissolution of marriage, or proceedings in bankruptcy.

M E T H O D S  O F  R E F E R R I N G  T O  A R B I T R A T I O N

    By Arbitration Agreement in Writing under the Arbitration Act. Such an agreement may be in writing under hand only, by deed, or by bond, signed by the party himself or his duly authorized agent. A party who has not signed may be bound if the agreement to refer, after being being signed by one party, is confirmed by the subsequent conducts of the party who has signed. Arbitration clauses in commercial contracts are submissions of this kind whereby the parties agree to refer to arbitration some difference which may conceivably arise in the future in relation to the contract into which they have entered. The submission should indicate whether all matters of dispute which might arise should be subject to arbitration, and if not, the scope of the arbitration clause should be precisely defined..

    The terms of a submission may be altered, with the agreement of the parties, at any time before the arbitrators decision has been given, but such alteration must be in writing and must be made at the instance of the parties themselves. The arbitrator has no authority to make an amendment.

     An agreement which purports to oust the jurisdiction of the court, being contrary to public policy, is illegal and void, but an agreement to refer to arbitration does not generally oust the jurisdiction of the court as it is still open to the parties to take legal proceedings instead of going to arbitration. However, if one party does institute proceedings the court may exercise its power under the Arbitration Act, to stay proceedings on the application of the other party. Moreover, if the agreement provides that reference to arbitration shall be a "condition precedent" to the right to sue, no action can successfully be brought until a reference to arbitration has first taken place for the reason that, by the terms of the agreement itself, no cause of action exists until then.

T H E  A R B I T R A T O R

    The parties to a reference have an absolutely free choice if the matter of the appointment.of an arbitrator. Whether it is better to have a layman or a lawyer is a very open question, and much depends on the particular nature of the reference. The person or persons selected must be appointed in accordance with the the provisions of the submission, and where no other method of reference is provided the reference will be to a sole arbitrator.

    Where the reference is to a single arbitrator and the parties do not, after differences have arisen, concur in the appointment of an arbitrator, any party may serve upon the other written notice to appoint arbitrator,

and if such appointment is not then made within seven days the court has the power under the Arbitration Act to make an appointment.

    Where the reference is to two arbitrators, they must appoint an umpire immediately after they themselves are appointed.

    Where the agreement provides for reference to three arbitrators, one to be appointed ny each party and the third by the two appointed by each party, the agreement has effect as if it provided for the appointment of an umpire. If, however, the appointment of three arbitrators is made any other way they will all three act as arbitrators and the award of any two of them will be binding. The distinction between a third arbitrator and an umpire is an important one. A third arbitrator is one of three who are required to act in concert and whose duties commence forthwith on appointment. An umpire, on the other hand, does not act with the arbitrators but enters upon the reference only when they have disagreed.

    If the reference is to two arbitrators, one to be appointed by each party, the failure of one party to make an appointment within seven days after the other party, having appointed his arbitrator, has served notice on the first party to make an appointment, the arbitrator already appointed may then be appointed as the sole arbitrator. His award will then be binding on both parties as if he had been appointed by their common consent. It is essential, however, that he be actually appointed as sole arbitrator as, otherwise, he would have no authority to proceed alone.

P O W E R S  O F  T H E  A R B I T R A T O R.

    Subject to the terms of the submission the arbitrator has power:-

    1. to administer oaths;

    2. to take affirmations of parties and witnesses;

    3. to correct in an award any clerical mistake or error;

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