SPEEDY ARBITRATION STANDS OUT IN DISPUTE OVER SHIP CHARTER

The recent New York maritime arbitration of the “M/V Gulf Sea” (S.M.A. 3095) primarily concerned itself with the merits of a shipowner’s claim for early vessel delivery and the charterer’s counterclaim arising from ship deficiencies.

However, this arbitration, in all likelihood, will long be remembered for its procedural swiftness. The arbitration panel resolved this large multinational dispute in less than three days..

The events giving rise to the dispute had their origin in a time charter party that called for the “Gulf Sea” to perform two trans-Atlantic round-trip voyages. However, following the first voyage the charterer returned the vessel, terminating the charter early. The shipowner immediately arranged for substitute employment for the ship to mitigate damages. The shipowner then moved in Connecticut and Pennsylvania courts to attach assets of the charterer as security for its damage claims. Thereafter, the charterer caused the “Gulf Sea” to be arrested at Panama for claims in excess of $5.5 million. Unable to post security or obtain a prompt hearing in Panama to contest the arrest, the shipowner called for an immediate arbitration under the charter party New York arbitration clause and nominated its arbitrator. When the charterer failed to respond, the shipowner petitioned the federal court in New York under the Federal Arbitration Act to compel the charterer to proceed to arbitration.

Expediting the Proceedings
When the charterer failed to respond, the court entered a judgment in favor of the shipowner and appointed an arbitrator to act on charterer’s behalf. To expedite matters, the court also appointed a third arbitrator to act as chairman of the arbitration panel. The court then directed the arbitrators to proceed to immediate arbitration and conduct expedited hearings to resolve all remaining disputes, including claims which were the subject of the arrest proceeding in Panama..

Within two days of the court’s order, the parties entered into a submission agreement that provided for immediate expedited hearings to resolve all disputes. The agreement also provided for a stay of court proceedings and any ruling by the arbitrators would be final with no right to appeal..
The parties also agreed to instruct their Panamanian counsel to stay the Panama action and to comply with the arbitrators’ rulings.

Pursuant to the court’s order and the submission agreement, the arbitrators conducted two days of expedited hearings that involved the production of voluminous documents as well as the testimony of five fact witnesses, two of which were located in Europe and taken by telephone..

The hearings began on Aug. 8 and were conducted in marathon fashion, the last day’s session lasting for more then 14 hours. Stenographic transcripts were maintained throughout the hearings. Two stenographers, working in tandem, were used to accomplish this feat..

By Phone and Fax
The morning after the hearings concluded, the arbitrators commenced deliberating at their respective homes via telephone and telefax and within 12 hours the panel had issued a 1,900 word award that was telefaxed to the parties. This final award provided for an immediate release of the vessel from arrest at Panama with a proviso that for every day thereafter that the vessel remained under arrest, the charterer would pay the shipowner $7,187 per day. The respective transmitted the award to their attorneys in Panama by telefax and within hours the vessel was free from arrest.

It remains to be seen if expedited arbitration hearings will become the wave of the future for resolving charter party disputes. However, the “Gulf Sea” award illustrates that in today’s age of telecommunications, this can be accomplished by parties to maritime arbitration agreements should they desire such a result.


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