In Agreement

I HAVE stated in the past that dissenting has to be a matter of conviction. We can't all see everything at all times in the same light, or reach the same result, even on the same facts and arguments. If we did, we would not have disputes or arbitrations. What is important when differences of opinion arise is that intellectual honesty is preserved and not compromised.

If an arbitrator is convinced that the position taken by the majority cannot be reconciled with his or her own position by further discussion, this should be sufficient reason to warrant the writing of a dissent. Dissenting, as such, cannot come as a total surprise for parties to an arbitration. It must have been in their expectations as a possibility, otherwise arbitration clauses would not have included a majority ruling provision. The question is whether the dissenting opinion should become part of the award.

As I am convinced of the value of proper dissents, I advocate that they should be included and/or published as part of the decision. While dissents themselves may be provocative and stimulating, they are nevertheless still the opinion of the minority, and hence without immediate or direct influence upon the decision. The positive aspect of a well-reasoned and eloquent dissent is that, although without precedential value, it may somehow plant the seed of doubt and give rise to closer scrutiny or reassessment of earlier or subsequent decisions, possibly leading to a sounder interpretation of the law.

But there are also more immediate effects. The dissent - or the indication of a possible dissent - during a deliberation also has, in my opinion, a positive impact upon the process, and maybe on the ultimate result. It makes the arbitrators focus even more on the contested points, which may lead to a reconsideration of a point, possibly resulting in an increase or decrease in the amount awarded.

On the other hand, there are dissents without the intellectual subtleties referred to above. For example, if someone suggests that two plus two equals five, then there should be no question that a disagreement is in order. Likewise, if in an arbitration a panel majority ignores accepted fundamentals, a dissent should not be unexpected.

In the normal course of an arbitration, parties either prepare their own case or are represented by counsel. The submissions by advocates are most helpful as they emphasise as well as clarify. However, there are a number of arbitration subjects which can readily and effectively be dealt with by commercial people, particularly since the topics may involve custom of the trade, non-legal issues or well-established principles of laytime accounting.

In cases where a party - and it is logically the respondent most of the time - does not show, the absence of an inquisitive opponent makes the proceeding a bit more difficult. This scenario also takes on a different slant, depending on whether the arbitration proceeds on documents only or is being presented by counsel with oral hearings. The claimant may feel that the case was properly presented, and the arbitrators may not be inclined to ask clarifying questions. When it then comes to the deliberation, questions might arise for which no answer can be supplied - unless the panel wishes to reopen the proceedings. What should arbitrators do then?

In one of my earlier articles, I alluded to an arbitration which I chaired and for which I wrote a dissent. The case of the Carolyn had an odd twist right from the outset. Both party-appointed arbitrators worked for the same firm and had a close working relationship. Once the panel had been completed, the charterers withdrew from the proceedings. The owners submitted a claim for various expenses, including a balance of freight for the first voyage and damages for the cancelled second voyage.

The panel was unanimous with respect to all items except the damages for the second voyage. The panel majority adopted the owners' claim, whereas I rejected it in full. My reasoning was that, although the panel was faced with an unopposed arbitration and clear evidence of the charterers' breach of contract in the non-performance of the second voyage, damages should not have been assessed on a default or punitive basis, but rather the claim had to withstand the test of commercial reasonableness, compliance with the contract terms and legal precedent.

Whereas the burden of proof remains unchanged, it has been recognised that proof of damages for wrongful termination does not need to be established with pinpoint accuracy. The general rule of damages is that the injured party should be placed in the same position as if there had been no breach. Since an owner's damages in similar situations can never be precisely calculated, most panels give the owner the benefit of the doubt, both as to mitigation and to calculations, trying to avoid giving the owner an unwarranted windfall. On the other hand, if the panel had been unanimous on the liability aspect and a disagreement had arisen with respect to the quantum of damages, these differences would probably have been resolved, particularly if the spread was not too great.

After discharging its first cargo in Japan, the Carolyn proceeded in ballast from Japan to Durban to lift the second cargo under this particular contract. When the charterers failed to supply specific voyage orders, which the owners considered a breach, they tried to find a mitigation voyage. The owners were able to conclude a voyage from the Persian Gulf to Durban. Their claim was for the shortfall between what the vessel would have earned compared with what it did in fact earn. The loss was quantified at approximately $150,000, which the panel majority awarded to the owners.

The reason for my disagreement was that the cancelled second voyage (Japan/Durban/Japan) would have taken approximately 53 days. The owners' mitigation voyage (Japan/Persian Gulf/Durban) took 36 days, leaving 17 'earning days' to be accounted for. After the discharge of the mitigation voyage at Durban, the owners fixed the vessel for a cargo from Durban to the Caribbean, for which the vessel earned an amount of freight which, when pro-rated to the seventeen unaccounted 'earning days', generated an additional $300,000.

The sum of what the vessel earned for the Japan/Persian Gulf/Durban voyage, together with the revenue of the seventeen 'earning days', totalled more than what the owners would have earned if the charterers had maintained the second voyage. Furthermore, the vessel ended up in an actual loading area compared with being free in Japan, which could have entailed a potential ten-day ballast trip.

Subsequent to the issuance of the award, I received a call from the owners' office complaining about my dissent and pointing out that since the party-appointed arbitrators were in agreement, my dissent was unnecessary and uncalled for. This call has always troubled me. I know I did the right thing at the time and under the prevailing circumstances. Would I have reached the same decision if the majority had awarded only $20,000? The answer has to be 'Yes', because I disagreed with their conceptual approach on liability. The quantum obviously flows from the decision on liability and is a matter of provable damages.

With respect to a dissent on liability, what is expected from that arbitrator in the damages phase? Should he/she actively participate in the review of the damage claim or, because of his/her liability dissent, sit back without further participation? It is my view, with others disagreeing, that even the dissenter must participate in the examination of the evidence for damages.

The process of being transparent and accountable through the publication of awards has led to some unwarranted conclusions. When discussing dissents, the matter of perceived owner/charterer propensity by arbitrators is frequently mentioned. Unfortunately, these are labels which are bandied about without any back-up data.

Since New York is the only forum where the awards, including dissents, are published, it is readily feasible to determine who dissented, when and why. Is it not better to expose it and know what to expect than to pretend that life is perfect by not talking about it? In jurisdictions that use an umpire system, one does not really know which of the party-appointed arbitrators dissented and why. Once the arbitrators have been unable to reach a consensus, they refer the matter to an umpire and become functus oficio. The award will then be the result of the umpire's writing, without the input of the arbitrators. While this settles the issue, does it provide for the best precedent for the industry as a whole? What about those arbitrators who may look at prior awards, including dissents, for guidance?

I recall a case some years ago which contained an umpire provision. The party-appointed arbitrators, although in accord on some underlying facts, could not agree on the final outcome, and the matter was referred to an umpire. Contrary to proceedings in other jurisdictions, this award included the views of both arbitrators followed by the umpire's discussion and award.

A quote by Adam Woolever comes to mind - "Let us cling to our principles as the mariner clings to his last plank when night and tempest close around him."