Maritime Arbitration

Vinayak Bhatia

Section A, Ll.B. 3yrs

A3256118043

1. Introduction

Arbitration has been an additional means of resolving disputes since its inception. It is
possible that at first some form of holiness was attached to it, which is why an arbitrator
(originally a sovereign) acted as the representative of the gods on earth.

2. Historical Perspective

Ancient evidence for the use of arbitration as a means of resolving disputes goes back as far
back as the third and second millenniums B.C. and found in Egypt and Mesopotamia, where
archeology has uncovered ancient records, some of which related to court and arbitration
procedures.1

However, an outstanding example of maritime arbitration will be found in Ancient Athens

and as reported by Demosthenes in his speech Against Formio, dealt with a dispute over a
cargo contract after a shipwreck. during the trip. 2 This shows that, due to the increase in
maritime trade in the eastern Mediterranean, arbitration has been widely used by Greek
traders, and especially Athenians, as an alternative to resolving maritime disputes.

Similarly, historians believe that even in ancient Rome, from the beginning, it should have
been the norm for private individuals to entrust arbitrators to rule on legal matters. 3 Later, the
1
M. MANTICA, Arbitration in Ancient Egypt, in The Arbitration Journal, A quarterly of the American
Arbitration Association, 1957, p. 158; M. DOMKE, Domke on Commercial Arbitration (The Law and Practice
of Commercial Arbitration), Wilmette, 1984, p. 8.
2
The works of Demosthenes accurately describe many substantial and procedural aspects of Athenian
arbitration, including the relevant role of party autonomy, the possibility to refer the dispute to arbitration even
after commencing litigation before the court and the power of the arbitrator to refer the parties back to the court.
3
G. BORN, International Commercial Arbitration, I, Alphen aan den Rijn, 2009, p. 11; M. MARRONE,
Sull’arbitrato privato nell’esperienza giuridica romana, in Rivista dell’Arbitrato, 1996, p. 1 ff.
development of economic relations and trade in the Mediterranean and the introduction of
customary law (ius gentium) established on bona fides must support the use of some form of
arbitration to resolve disputes between the Romans and non-Roman traders.

During the Middle Ages the use of maritime arbitration based mainly on application, to
merchants, lex maritima, defined as ius commune, part of lex mercatoria, and with maritime
customs, codes, conferences and practices from ancient times, without international borders
and existing in any somewhere unless a certain rule is set by law.4

Any dispute that arises between the members of an organization is resolved immediately by
the cundum legem maritimam, according to tradition, equality, and internal law by the courts
of mercantile (curiae mercatorum) or by judges. Arbitrators are “peers”, in other words, the
merchants of the same city or country are often chosen for their knowledge of local laws and
customs.5

In the centuries that followed, with the rise of the nations, arbitration became the preferred
method of resolving disputes.

To cite an example, in England, in line with the ongoing implementation of the lex maritima
in the common law system, arbitration was a common way to resolve disputes in transit cases
between commercial men, especially where questions of nautical skills were involved where
often two or more private or experts acted as “aimables compositeurs”.6

And in France commercial arbitration remained deep, especially during the times of the
Revolution of 1789, when it was officially described as “le moyen le plus raisonnable de
terminer les contestations entre les citoyens”.7

The birth of a modern maritime arbitration can be traced back to the American Civil War
(1861-1865) as contractual claims followed by a southern military ban created an uproar
before English courts, which confirmed the Liverpool Cotton Association, whose members
were in charge of the cotton industry, Liverpool soon led to its acceptance in London and,
further, in its worldwide expansion.8
4
W. TETLEY, The general maritime law – the lex maritima, in Syracuse Journal of International Law and
Commerce, 1994, p. 109.
5
E. KADENS, The Myth of the Customary Law Merchant, in Texas Law Review, 2012, p. 1202; G. ZEKOS,
International Commercial and Marine Arbitration, Abingdon, 2008, pp. 10 - 11.
6
R.G. MARSDEN, Select Pleas in the Court of Admiralty, I, London, 1894, p. LXIX and p. 90 - 91 where is
reported an excerpt from an award relative to a dispute arisen following a collision between vessels and
originally published in the Admiralty Court Act Book, No. 128, 8 June 1599.
7
As defined by art. 1 of the Loi sur l'organisation judiciaire des 16-24 aout 1790.
8
B.L. BENSON, The Spontaneous Evolution of Commercial Law, in Southern Economic Journal, 1989, p. 656.
The outbreak of trade disputes is a common occurrence in international trade, so it is in each
case inevitable.

3. Indian Perspective

Over the past few years, India has become a fearsome commercial power, partly because of
its moldy sea. At the end of the 2019 financial year, the volume of trade at the national high
seas stood at 699 million tons9 and the number is expected to grow steadily. International
trade has contributed to growing trade.

The liberation of the shipping sector through various reforms such as the National National
Maritime Development Program, with a total value of $ 11.8 billion 10, and the construction of
infrastructure have ensured facilitation and transportation of goods. But as is the case with
many trade relations, due to the involvement of many MNCs, certain legal issues have been
brought to the fore. To ensure that these disputes are resolved amicably, and to ensure that the
parties involved do not present a negative image to their investors and clients, law
enforcement authorities in India have established an arbitration network to resolve disputes.

In India, the Indian Council of Arbitration, formed in 1965 by the Government of India and
other legal entities such as the Federation of Indian Chambers of Commerce & Industry
(FICCI)11, has enacted the basic rules of participation and administration in relation to the
Maritime Arbitration.

9
Economic Times, Top ports record marginal upswing in FY19 cargo handling at 699 MT (2019).
10
Indian Ports Association, Report of the Task force on Financing Plan for Ports (2019).
11
See Loukas Mistelis et al., World Arbitration Reporter- 2 nd Edition.
 3.1. The Maritime Arbitration Committee

At the national level, under the above-mentioned laws enacted in 2016, under Act 3, a
Maritime Arbitration Committee is authorized to establish. It consists of ten members,
including experienced nominees nominated by the Ministry of Shipping and the Shipping
Corporation of India and other members of the Maritime Panel of Arbitrators.12 Under clause
10 of the rules, if the amount of the claim does not exceed Rupees One Crore and no clear
allegations are made by the Committee, a Sole Arbitrator will be required to be appointed. If
not, each party is required to nominate an individual, from the Panel of Arbitrators, and these
persons will agree to appoint a third arbitrator, as is the case in the case of Southern
Petrochemical Industries Corporation vs The Great Eastern Shipping 13. If the other party
fails to nominate a second person, according to the decision of the Delhi High Court in the
case of Steel Authority of India Limited vs Indian Council of Arbitration 14, Committee, under
Rule 10 (3) (b) of the Statement, appoint an arbitrator. By international standards, even if the
Bill of Lading does not have an arbitration provision, if the Charter-Party says so, this clause
is considered valid.

Apart from the level of influence and importance given to it, the Committee does not have
any kind of specific guidelines or lines with regard to the appointment or performance of its
members. As part of the administrative rules, it has no legal basis and therefore the rules of
the Committee do not have legal obligations. Thus they do not have the teeth of powerful
committees such as the Shanghai International Shipping Arbitration Court possess statutorily.

3.2. Effects of the Legislative Amendments

The Indian Parliament, in an effort to meet international mediation standards established by

organizations such as the Permanent Court of Arbitration of Hague, passed certain laws in
2015 and 2019. Major provisions included under the amendment made to the parent
legislation in 2015 include a revised translation of Section 9 of the Arbitration and
Reconciliation Act 1996 relating to ‘interim relief’ which must have legal protection and
12
See IDAC India’s Maritime Arbitration Rules 2019.
13
Delhi HC, O.M.P 498/ 2013.
14
Delhi HC, LPA 103/2016.
preservation or some form of security to ensure that conflicting assets are not compromised.
Prior to the amendments, enforcement of these provisions was a very difficult task, especially
if the matter was handled by an external dispute resolution committee. However, due to the
reconstruction of the definition of 'Court' under Section 2 (2) of the Act, currently all
commercial products involved in any dispute, located in the ports of India, may be considered
for these measures within a specified period. Following this action, local mediation
committees such as the Mumbai Center for International Arbitration have incorporated this
concept into their own laws. Section 11 (6A) of the Act is introduced to ensure that the
Supreme Court or the High Court does not participate in any other part of the Agreement
other than the arbitration clause. It was also held in connection with the case of BGS SGS
Soma JV vs NHPC Ltd.15 in terms of an amended Section 37 that parties may only go to court
if an application is made if the previous application is dismissed under Section 34 of the same
law. The amendment in 2015 was made following a BALCO case16, in which it was decided
that the policy of non-interference should be strictly adhered to by the judiciary system,
especially with regard to international arbitration issues.

Following this amendment, the re-appointment of the Legislature for the subsequent adoption
in 2019 also included the national assembly of the Maritime Arbitration. Following this
amendment, in the case of Garware Wall Ropers Ltd. vs Coastal Marine Constructions 17,
despite the existence of Section 11, the Supreme Court held that due to the absence of a
stamp, the agreement violated the Maharashtra Stamp Act of 1958, and therefore the court
had jurisdiction to bind us pending the payment of appropriate fees and penalties.

In addition, the amendment changed some of the existing provisions such as the appointment
of arbitrators under Section 11 (3) of the Arbitral Institutions set by the proposed Arbitration
Council of India, which has been formed under Section 43D of the new Act.

4. International Perspective

The global Arbitration Quality is established by various organizations around the world that
are involved in this practice. Each stakeholder organization establishes a preferred

15
Supreme Court of India, CA.No. 9307 of 2019.
16
Supreme Court of India, CA.No. 7019 of 2005.
17
Supreme Court of India, CA.No. 3631 of 2019.
mechanism for regulating the rules, practices, and provision of joint arbitration awards to
form the basis on which the mechanisms have been developed and thus improve the
provisions of the UNCITRAL Model Law on International Commercial Arbitration.
Therefore, conducting an in-depth analysis of prominent Maritime Arbitration Organizations
is appropriate when evaluating this industry.

4.1. London Maritime Arbitration Association

Founded in 1960, this hard-working organization is constantly updating its Code of Conduct
and performing miracles at some of the world's busiest ports. It issued various terms and
conditions such as the LMAA Small Claims Procedure, 2017 and the Fast and Low-Cost
Arbitration (FALCA)18 document, which resulted in an increase of 2500 cases and the
awarding of nearly 500 awards19, regardless of what happened to Brexit, which was released
higher than any other organization at the time.

4.2. Emirates Maritime Arbitration Centre

Sheikh Rashid Al Maktoum, the leader of the UAE issued Decree No. 16 in 2016 to establish
a world-class approach to competition with foreign criminal bodies and to promote the
volume of maritime trade in the nation through the establishment of EMAC. 20 Over the years,
EMAC has consolidated its position as a leading arbitrator in the MENA region (Middle East
and North Africa), although it has been relatively new among other groups. In the short term,
it has authorized the establishment of Arbitral transfer clauses in various domestic contracts
and has been actively involved in the claim. The organization is expected to host the
International Congress of Maritime Arbitrators in 2022, becoming the first nation in the
Middle East to do so.21

18
GH Sperling, New London Arbitration Rules: Paradise Regained? (1996).
19
LMAA 2019 Statistics.
20
Gordon Blake, The EMAC Finally Established, (2016).
21
Sea Trade Maritime News, UAE to hold International Congress of Maritime Arbitrators in 2022 (2019).
 4.3. Singapore Chambers of Maritime Arbitration

Apart from SIAC, the aforementioned organization was established as a specialized unit to
deal with trade issues as the nation is home to about 3000 shipping companies. Founded in
2004, and gained independence from the SIAC in 2009 22, the organization led a written
approach to the sector. It outlines three principles that must be strictly adhered to. The rules
of the 2015 SCMA Arbitration Rules are the first of its kind, authorizing exposure to
institutional interventions and the use of arbitral awards and the selection of arbitrators
among other things. The second is SCMA Small Claims Procedures procedures that operate
within the $150,000 limit. The third and most obvious is the Singapore Bunker Claims
Procedure, which deals with the fueling of ships and illegal siphoning. The last one is the
SCMA Expedited Arbitral Determination of Collision which as its name suggests it should
work directly with respect to the determination of collision liability.

5. Conclusion

Maritime Arbitration has been an integral part of dispute resolution over the issues related to
international trade, it has been a part of our international trade since time immemorial.

In the international maritime arbitration race, India is far behind. The legal interventions that
take place in this process, despite the amendments, especially with regard to arbitration
awards, are still widespread. Only through the legal allocation of the power of punishment
and absolute independence that the nation can be introduced as a lucrative trading business.

22
Rolf A Shutz, Institutional Arbitration: A Commentary (2013).