Maritime Arbitration and Alternative Dispute Resolution

Alternative Dispute Resolution (“ADR”) refers to any means of settling disputes outside of the courtroom. The two most common forms of ADR are arbitration and mediation. Arbitration is a simplified version of a trial involving no discovery and simplified rules of evidence. Either both sides agree on one arbitrator, or each side selects one arbitrator and the two arbitrators elect the third to comprise a panel. Arbitration hearings usually take less time and expense than trials and the opinions are not public record.

Most charter-parties contain a clause whereby the parties agree to resolve by arbitration disputes that arise under the vessel charter. Moreover, arbitration is increasingly the favored way of settling disputes over many other types of maritime contracts.

Maritime arbitration in the United States is generally governed by the provisions of the Federal Arbitration Act. The Federal Arbitration Act declares that a “written provision in any maritime transaction or a contract” providing for arbitration of disputes “shall be valid, irrevocable, and enforceable” except for “such grounds as exist at law or in equity for the revocation of any contract.” The term “maritime transaction” is defined as including:

“Charter-parties, bills of lading of water carriers, agreements relating to wharfage, supplies furnished to vessels or repairs to vessels, collisions, or any other matter in foreign commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction.”

While arbitration clauses are primarily used in charter-parties, they may be broadly used in other maritime transactions, including bills of lading, by agreement. The American courts will enforce choice of forum clauses (and by implication choice of law clauses) contractually agreed upon by the parties dealing at arm’s length and in good faith. The United States and most other nations with significant maritime interests have ratified the provisions of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which has stimulated international uniformity of legislation and practice.

Mediation is an even less formal alternative to litigation. Mediators are individuals trained in negotiations that bring opposing parties together and attempt to work out a settlement or agreement that both parties accept or reject. Mediation is used in the Federal Court system as an alternative mechanism for the resolution of civil disputes leading to disposition before trial of many civil cases with resultant savings in time and costs to the litigants and to the Court, but without sacrificing the quality of justice to be rendered or the right of the litigants to a full trial in the event of an impasse following mediation.

Excerpts from ADR, Legal Information Institute (Cornell University Law School).