The Society of Maritime Arbitrators of New York has developed a shortened arbitration procedure that is changing the way certain maritime disputes are being resolved.
This shortened procedure provides a swift and economical method of arbitrating small or uncomplicated claims. In certain instances the arbitration cost can be less than $750.
The need for a simplified and cost-efficient maritime arbitration procedure was brought to the public’s attention at a meeting of the Connecticut Maritime Association in November 1987.
A Conventional maritime arbitration often took over two years to complete. The cost of such a procedure, entailing three arbitrators, stenographers, witnesses and attorney fees, could far exceed the sum recovered.
The Connecticut group formed an ad hoc committee to seek a workable method for resolving small charter demurrage disputes in an economical and prompt fashion. Shortly thereafter, the group sought suggestions from the Society of Maritime Arbitrators.
The society is a professional organization dedicated to promote sound arbitration practices in maritime disputes. It publishes a roster of its members from which parties to disputes select arbitrators particularly suited to decide claims requiring specialized knowledge or expertise.
The society had been sensitive to the need for a swift and cost-efficient method for arbitrating simple demurrage claims for some time and had in the past promulgated its little used arbitration method known as the “simplified procedure.”
Unfortunately, this method contained two fatal flaws. First, the claim could not exceed $`5,000. Secondly, the simplified procedure required disputants to agree to its use after the dispute arose. Unfortunately, once a dispute arises, parties rarely agree on anything.
During 1988 an entirely new procedure was drawn up. This “shortened arbitration procedure” received overwhelming support from a world wide sample of potential users who responded to a questionnaire.
The document that sets forth the shortened procedure consists of a preamble and nine paragraphs.
The preamble or “trigger clause” is incorporated into the charter. It mandates that if the sum of the claim does not exceed a specified amount, the shortened procedure automatically will take effect.
The procedure does not fix a specific dollar amount. Instead, the parties choose the amount at the time of the fixture. For example, corporate giants might choose higher trigger figures than smaller shipowners.
The parties are encouraged to agree upon a sole arbitrator. If unable to do so, then a panel of three arbitrators is formed. If the defending party fails to appoint its arbitrator, then the arbitrator appointed by claimant becomes the sole arbitrator.
The sole arbitrator or arbitrators then establish time tables for written submission of claims and supports. Although not encouraged, each party is entitled to a single hearing to orally supplement his position. Witnesses are not permitted and no written transcript is maintained.
Under exceptional circumstances, parties are permitted one postponement of up to 10 days. After the conclusion of the evidential phase, the parties may submit written summaries of their positions. Arbitrators’ fees cannot exceed $750. Most importantly, the written award must be issued within 30 days.
Although the shortened procedure has been in effect for only nine months, preliminary indications are encouraging. Already many shipping and chartering interests have made the shortened procedure a supplement to their charter party forms.
Only experience will tell if the Society of Maritime Arbitrators has solved the problem, or if additional fine tuning is necessary.
It is encouraging to note that the society does not consider the shortened procedure to be written in stone. Its aim is to remain receptive to industries’ suggestions as to how the procedure might be improved.