ARBITRATON PROCEEDINGS UNDER A CHARTER PARTY

The usual wording for arbitration proceedings in Part 1 of  Asbatankvoy is”London, U.K. Law” or “New York, U.S. Law”. Owners should  be aware that without specifying the arbitration rules to be followed,  the Owner must bring his claim before the court if the Charterer does  not agree to the rules of the London Maritime Arbitration Association  (LMAA) or to the rules of the Society of Maritime Arbitrators, Inc.  (SMA).

Demurrage Specialists International has had two cases this year  wherein the rules to be followed were not specified in the Charter  Party. One Charter Party called for arbitration in New York, U.S. Law  and in the other Charter Party arbitration was to be London, U.K. Law.  For London, the Charterer would not agree to arbitrate under the rules  of the LMAA and the other Charterer to the rules of the SMA. As such,  the Owners had to file their claim following the rules of The  Arbitration Act of 1996 for London and the U.S. Arbitration Act for U.S.  Moreover, in both cases, the Charterer also refused to agree on the  selection and the number of arbitrators. As such, the Owners had to file  a petition to compel arbitration, before proceeding.

DSI strongly recommends that at the time of negotiating a fixture,  the Owner specify the rules in addition to location and law. It is easy  enough to add “Rules of the London Maritime Arbitration Association  (LMAA) if the location is London and “Rules of the Society of Maritime  Arbitrators (SMA) if the location is New York.

Very often INCOTERMS are used as the governing GT & C  in Purchase and in Sales contracts even though the contract contains no  marine provisions clauses. INCOTERMS are interpretations of  international trade terms defining seller’s and buyer’s responsibilities  under specific modes of transportation. INCOTERMS do not contain  maritime provisions nor do they address the provisions contained in GT  & C’s.

At the time of a trade, agreeing to GT & C’s that  have not been previously received or reviewed has resulted in a loss of  recovery of demurrage. Buyer’s should state “subject to buyer’s receipt,  review and acceptance.” GT & C provisions can contain many  unpleasant surprises:

  1) A specific loading / discharging rate   2) Exemptions to laytime not contained in the C/P   3) Demurrage payable AFRA x WS vs. C/P rate   4) Demurrage payable only to extent recoverable   5) Short time bar (30-40 days)        

“Nothing dejects a trader like the interruption of his profits.”Samuel Johnson,1776