LAWYERS CAN FIT BILL AS ‘COMMERCIAL MEN’ IN ARBITRATION CASES’

Black’s Law Dictionary describes the wrd “commercial” as relating to or connected with trade . . . or commerce in general. The same dictionary defines “arbitrator” as a private, disinterested person, chosen by the parties to a disputed question, for the purpose of hearing their contention, and giving judgment between them. What then is the meaning of the term “commercial arbitrator?” The U.S. Court of Appeals (Second Circuit) at New York recently answered this question in the Webster case (Docket 93-9040). The court determined the meaning of a charter party provision requiring maritime arbitrators to be “commercial men.” The appeal was from a judgment confirming an arbitration award, the lower court having determined the appointment of an admiralty lawyer to an arbitration panel did not violate the charter’s “commercial men” provision. Parties agreeing to arbitrate are free to select arbitrators in any fashion. The law does not dictate specific arbitrator qualifications, other than fairness and impartiality. Arbitrators are often selected for professional competence in a specific business to which the dispute relates. This special knowledge enables them to understand complicated commercial issues. Arbitrators familiar with customs of a trade often render decisions faster than would be expected in court proceedings constrained by procedural and evidentiary formalities. In deciding the Webster case, the appellate court noted that parties to maritime disputes often desire individuals with experience in maritime commerce as arbitrators. The premise is based upon the court’s observation that “commercial men . . . are likely to be more familiar than the average lawyer . . . with the relevant background of international shipping.” This view is shared by the Society of Maritime Arbitrators Inc., whose roster includes shipowners, brokers, charterers, surveyors, shipbuilders, insurers, underwriters, stevedores, terminal and vessel operators, claims managers, mariners, average adjusters, naval architects, and marine consultants. The roster does not list practicing admiralty attorneys. However, some nonpracticing admiralty lawyers are listed. ‘Commercial Man’ Status Challenged

In the Webster case a party sought to vacate an award, contending one of the arbitrators was not a “commercial man” due to his status as a practicing admiralty attorney. The lower court rejected the contention because the attorney had spent many years as an insurance manager for a shipping company and was experienced in commercial matters. The appeals court agreed with this rational. “The practical commercial experience that a lawyer gains during the years of his non-legal work in the industry cannot be said to fall away the moment he assumes the mantle of practicing lawyer. There is no good reason why one who spends his career as a practicing lawyer should be considered a commercial person the moment he withdraws from practice and takes up a position in the maritime industry, while one who has spent his career on the commercial side of the industry and then takes up the practice of law should not. We hold that, if they fit, a lawyer can wear the two hats . . . .” It should be emphasized that parties can select lawyers as arbitrators under most arbitration clauses. Certain disputes may arise in which legal expertise may be helpful in resolving complicated legal issues such as burden of proof and choice of law. Indeed, the type of charter party form used for vegetable oil shipping expressly requires that if there are three arbitrators, one must be an “admiralty lawyer.” The question is: Must the admiralty lawyer be a practicing attorney?


[Back]