Australia: Boost For Maritime And Transport Arbitration In Australia

Last Updated: 20 November 2007
Article by Derek Luxford

In April 2007 the Australian Attorney General announced Government support to boost Australia as a regional centre for maritime and transport arbitration. The Australian Government announced the formation of the Australian Maritime and Transport Arbitration Commission to encourage and facilitate maritime and other transport arbitrations as a preferred method of commercial dispute resolution in Australia. The move is designed not only to encourage maritime and other transport arbitration between Australian parties but also involving non Australian parties which is frequently the case in maritime disputes. The move has been welcomed by the maritime community generally and had been supported by prominent peak bodies such as the Maritime Law Association of Australia and New Zealand (MLAANZ) and the Federal Court of Australia which currently hears most maritime related disputes.

Indeed a recent Full Federal Court decision in the Comandate has major ramifications for maritime arbitration. In this decision the Court overturned an anti anti-suit injunction originally granted by the trial judge in favour of Australian charterers. The Full Federal Court stayed the Court proceedings in favour of the arbitration provision in the relevant charterparty which provided for arbitration in London under English law. The Greek owners had pressed for the dispute to be resolved in accordance with the charterparty provision. The Australian time charterers had been keen to utilise the provisions of the Australian Trade Practices Act 1974 involving misleading and deceptive conduct which would not apply should the dispute be arbitrated under English law.

The Federal Court has also been active in encouraging mediation of maritime disputes and recently set up a procedure whereby small cargo claims are compulsorily referred to mediation before a Registrar of the Federal Court. Voluntary mediation between parties (encouraged by the Courts) has become a popular and effective way of resolving many shipping and other transport related disputes in Australia in the last decade. The essence of a successful mediation is that all parties need to be willing to compromise and the mediator needs to be an effective facilitator. With arbitration, as with litigation in Court, the tribunal will decide the dispute which will result in there being a winner and a loser.

It would be fair to say that unlike maritime mediation and litigation, maritime arbitration in Australia has struggled to obtain recognition internationally notwithstanding the existence of helpful legislation (such as the Australian International Arbitration Act 1973), the existence of the MLAANZ Maritime Arbitration Rules, various arbitral bodies providing the facilities for international commercial arbitration, as well as an experienced body of maritime arbitrators and lawyers. Although there are some maritime arbitrations in Australia pursuant to standard shipping dispute resolution clauses for instance under some charterparties widely used in bulk trades, and other maritime arbitration take place pursuant to ad hoc agreements between the parties after the emergence of a dispute, there has been until now no peak organisation such as the LMAA in London controlling maritime arbitrations in Australia.

In practice there also has been a degree of reticence by parties involved in international shipping to submit their disputes to arbitration in Australia. In reality dispute resolution clauses are often ignored during the negotiation of shipping contracts such as charterparties, contracts of affreightment and bills of lading (the latter are invariably standard forms with no negotiation taking place on the "small print" where dispute resolution clauses appear). Australian shippers, charterers and even ship builders often comment that it is difficult to persuade a non Australian party to agree to Australian law or arbitration when they are comfortable with say English law and London arbitration, notwithstanding that Australian shipping law is similar to English shipping law. At least one prominent player in the Australian shipping industry has commented that he likes his trips to London too much to give them up to arbitrate in Australia even where the evidence is in Australia.

The Government’s announcement is a very good start but the international shipping community will need to be persuaded that there are benefits in submitting themselves to Australian law and arbitration. Certainly the savings in legal costs and the relative speed with which such arbitrations (and mediations) can be progressed compared to some overseas arbitration centres should be compelling factors for the costs and time conscious shipping industry.

In this context it is interesting to note that at the same time that the Australian Government and Courts are encouraging local arbitration and mediation and giving precedence to foreign law and arbitration clauses over attempts to litigate in Australia, there is a vigorous debate in London between prominent shipping lawyers and some members of the LMAA as to the benefits of arbitrating in London with its delays and costs compared to the relative speed with which cases can be brought before the Commercial Court. There are also issues in England as to the pros and cons of the 1996 Arbitration Act with its very limited rights of appeal. Some experienced shipping lawyers in London have suggested that their clients would be better off going to the Commercial Court in the first place not only because the results will be handed down quicker (and often at less cost) but if the parties have a genuine legal dispute then it is better for the Courts to hear the dispute in the first place and where there may be a right of appeal on important issues of shipping law. It is only by Court cases being reported, so it is argued, that allows the Common Law to develop, whereas with confidential arbitration awards not being published this cannot happen. Many of these issues apply in other jurisdictions where arbitration is prominent including Australia (although in some prominent maritime arbitral centres such as New York arbitral awards are published).

The boost given to maritime and other transport arbitration in Australia by the establishment of the Australian Maritime and Transport Arbitration Commission will no doubt focus the minds and efforts of all parties involved in the maritime and transport industries in Australia to take advantage of this farsighted development and to encourage the development of Australia as a regional centre for maritime and transport arbitration. Singapore has already shown how this can be done to great effect. With the increasing role of Asian shipowners in international shipping and with Australia’s prominence as a shipper of bulk cargoes (including energy cargoes such as LNG), the lower legal costs of arbitrations and dispute resolution in Australia compared to many centres, and with the availability of a body of experienced maritime arbitrators and lawyers to conduct arbitration, there would appear to be strong legal and commercial reasons for the emergence of a new centre for international maritime and transport arbitration in Australia.

Ultimately it will depend upon the users of dispute resolution services as to whether they are prepared to give the Australian system a go. As variety is the spice of life in shipping and shipping is the original global industry, the international shipping community should welcome this development as bringing more competition and choice into the dispute resolution arena. At the very least there is a case, to borrow a horticultural idiom, to "suck it and see" whether they like it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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