Arbitrating in New York

MARITIME arbitration is as old as the Phoenicians. Maritime arbitration in New York is slightly less old. The US Federal Arbitration Act of 1925 established guidelines and a summary means of enforcing arbitration agreements as well as awards. The Society of Maritime Arbitrators Inc, New York, meanwhile, is younger still, having recently celebrated its 35th anniversary.

The SMA is a professional, non-profit organisation whose mission is to promote sound maritime arbitration practices and to establish ethical standards for its membership and the maritime industry. It was established in 1963 by a small group of individuals active in maritime arbitration in New York who saw the need to form an organisation to promote arbitration. Today, the great majority of maritime arbitrations in New York are conducted under SMA rules.

In order to commence an arbitration in New York or under SMA rules, it is necessary for the claimant to advise the other party that it is invoking the clause in its charter party or contract and to simultaneously nominate its arbitrator. The other party should then be asked to appoint its arbitrator. If the contract provides for a sole arbitrator, however, the claimant should begin by providing the other party with a list of suggested arbitrators, from which a mutually suitable appointee can be selected.

It is not necessary to have a lawyer act as your representative before an SMA arbitration panel. Under SMA rules, anyone nominated by a claimant or respondent may act on their behalf before an arbitration panel. But the appointment of an attorney by one side will inevitably lead the opposing party to debate the wisdom of proceeding without its own legal representative.

"More and more often, parties are tailoring their own procedures to resolve their disputes and are coming to SMA members for help in applying them."

In New York, arbitrators must make disclosure of their relationships with the parties, lawyers and other arbitrators on the panel. These may be made by mail prior to the hearing or verbally, at the first hearing.

The parties may opt to proceed on documents, or with a formal hearing. It is not necessary to declare at the outset whether the arbitration is going to be handled on documents alone, since parties can reserve the right to ask for a hearing at a later date.

New York arbitrators do not charge appointment fees, or booking fees to reserve hearing dates. But cancellation fees may be charged.

New York has a reputation for flexibility in terms of scheduling hearings. Although the majority of arbitrations are now handled in all-day sessions, some arbitrators also sit at any time during the day, during lunchtime only, or in the evening after business hours.

In the case of a three-man tribunal, if a majority of two arbitrators agree and one dissents, the dissenter can write a dissenting opinion which is attached to the panel's decision. Dissenting opinions are deemed to be of real value, on the basis that a well-reasoned dissent can sometimes form the basis of a prevailing majority decision in a subsequent dispute on the same issue.

Previous awards do not automatically stand as precedents, but panels may be influenced by earlier decisions. Arbitrators often follow a previous decision if they agree with the reasoning of the award issued by the panel.

The SMA publishes the decisions of its members in its quarterly awards service. In New York, arbitrators explain the reasons for their decisions. Awards are enforceable in any country which is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral awards and the Inter-American Convention on International Commercial Arbitration. Maritime awards in New York are usually final and binding. There are very few specific grounds under which an award can be vacated, and these are confined to the fairness of the arbitration procedure. A mistake in law or fact is generally not a ground for vacating an award. Motions to vacate, modify or correct must be made within three months of the date of the award. Judicial review is only allowed where provided for in the arbitration clause.

The rules of the SMA are designed to encourage efficiency, flexibility and cost-effectiveness. They provide the opportunity for the awarding of attorneys fees and panel expenses where appropriate, and allow for the consolidation of disputes.

If all the charter parties provide for SMA arbitration, disputes may be consolidated if they involve related contract disputes with others, arising from common questions of fact or law. Consolidation can save time and expense by providing an efficient and co-ordinating procedure, resulting in a uniform decision consistent with the facts.

Unless otherwise provided for, consolidated disputes must be heard by a three-arbitrator panel either appointed by agreement of all the parties or, failing that, as ordered by the courts.
The ability to consolidate disputes is especially useful in situations where one party charters a vessel and then subcharters it to another party. Disputes arising under a string of charter parties involving the same vessel are ideally suited to consolidation.

Under US law and practice, arbitrators may generally not award attorneys' fees unless empowered by the arbitration clause to do so. Arbitration panels can only make an award of attorneys fees if both parties to a proceeding demand it. But a unique feature of the SMA rules automatically grants arbitrators the power to award a reasonable allowance for attorneys fees to the winning party. Indeed, arbitrators are encouraged to do so. In many awards, SMA arbitrators now award all or a part of legal expenses incurred by the aggrieved winning party, in addition to the cost of the arbitration proceeding.

Under the standard arbitration rules, awards should be issued within 120 days from the close of proceedings. In fact, most awards are issued within 65 days, and some within the space of a few days. A few, of course, may take longer than 120 days. Emergency hearings, meanwhile, can usually be accommodated within 24-to-48 hours.

The SMA's special shortened arbitration procedure encourages short deadlines, and the decision must be issued within thirty days of the date of closing of the proceeding. Disputants are encouraged to agree on a sole arbitrator, but parties have the option to have three arbitrators. The fee of each arbitrator is limited to $1,000, plus expenses.

The SMA also has in place conciliation rules. In several recent cases, parties have asked for arbitrators to mediate their disputes before proceeding to arbitration.

SMA president Lucienne Bulow says, "The SMA is dedicated to providing sound arbitration practices and dispute resolution procedures to help shipowners, charterers and others resolve their disputes in a fair and amicable fashion, while continuing to maintain good commercial relationships. More and more often, parties are tailoring their own procedures to resolve their disputes and are coming to SMA members for help in applying them. This is a most welcome and healthy sign."

SMA code of ethics

• Members shall be throughly familiar with and be guided by the rules of the SMA.
• Each member shall observe the highest standards of personal and professional conduct, free from impropriety or the appearance of impropriety. A member's personal behaviour in the performance of his official duties should be beyond reproach.
• Arbitrations shall be conducted with dignity and decorum and in such manner as to reflect the importance and seriousness of the proceeding.
• Before accepting appointment, an arbitrator may only enquire as to the general nature of the dispute and the names of the parties and their affiliates involved. A member shall not act as an arbitrator in any proceeding in which he, his associates or his relatives have a financial interest, or where his association with either the parties, counsel or other arbitrators may give rise to an inference of bias without making a full disclosure of the relationship. A member shall not participate in a proceeding in which he has allowed others to inform him of details of the case before him prior to the first hearing.
• No member shall confer with the party or counsel appointing him regarding the selection of a third arbitrator.
• Once the panel is complete, all communications between the disputants or their counsel and the panel shall be conducted through the chairman. Neither of the other arbitrators shall become involved in direct communication with either disputant or his counsel.
• In the conduct of an arbitration, each member shall exercise care to remain absolutely impartial and always abide by principles of honesty and fair dealing. Since arbitrators are obliged to render decisions, "compromise for compromise sake" should be avoided in favour of objective adjudication.
• Once the proceedings start, each member shall acquaint himself with all facts, arguments and discussions relative to the proceeding so that he may properly understand the dispute in arbitration.
• During the deliberation process and prior to the award being finalised, the arbitrators shall confer and jointly discuss the case in all its aspects. No discussion on the merits of the case is permitted at any time between arbitrators unless all three are present.
• Each member of the SMA shall be held accountable for his conduct as an arbitrator. In case of complaint of misconduct of a member, he shall be given a hearing before the committee of professional conduct, at which time the evidence of such alleged misconduct shall be presented to the member. He shall have the right of explaining or denying the alleged complaint to the committee, which shall make such recommendations to the board of governors as it deems advisable. All members agree to abide by the decision of a majority of the board without right of appeal in any other forum whatsoever.