SMA
Society of Maritime Arbitrators
Resolving Maritime Disputes For Over 50 Years

Maritime Arbitration In New York

The origins of maritime arbitration can be traced as far back as the voyages of ships owned by ancient Phoenicians carrying the cargoes of Greek traders. Ever since, arbitration has played a significant role in waterborne commerce.

Although American Courts regularly enforced arbitration awards from the early days of the Republic, it was not until 1925 that the U.S. Federal Arbitration Act [9 U.S.C. §§ 1-14] (the "Act") was enacted, establishing guidelines and a summary means for enforcing arbitration agreements as well as the arbitration awards issued pursuant to those agreements.

New York has regularly been chosen as an arbitral site in charter parties and other contracts of affreightment starting with the New York Produce Exchange Time Charter in 1913. Although the New York Produce Exchange, founded in 1862, no longer exists, its form of charter party remains in wide use throughout the world. The charter calls for arbitration of disputes in New York by three commercial men (which is understood to mean "three commercial persons" regardless of gender). Today New York arbitrators are called upon to decide disputes under many forms of dry cargo and tanker charter parties as well as other commercial contracts including the sale and purchase of vessels and commodities, ship repair contracts, ship management agreements, bunker purchase agreements, terminal lease/operating agreements, salvage, wreck removal and increasingly more sophisticated dry cargo and tanker contracts of affreightment.

THE SOCIETY OF MARITIME ARBITRATORS, INC.

In 1963, a small group of well-credentialed individuals active in maritime arbitration in New York foresaw the need for an organization dedicated to the promotion of sound arbitration practice by experienced and highly qualified maritime and commercial professionals who would observe strict ethical standards. As a result, they formed the Society of Maritime Arbitrators, Inc. (SMA), a professional, nonprofit organization that, unlike other arbitral forums, requires its members to only issue fully reasoned awards. The SMA then makes those awards available to the maritime community through subscription to its Awards Service, as well as the Lexis-Nexis and Westlaw information retrieval systems. Also, unlike some other arbitral forums, the SMA charges no fee to the parties for its services, nor does it oversee or administer the arbitration proceeding. Instead, that crucial task is left to the discretion of the participating arbitrators.

SMA Model Arbitration Clause

Should any dispute arise out of this contract, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final and for the purpose of enforcing any award, this agreement may be made a rule of a court of competent jurisdiction. The proceedings shall be conducted in accordance with the Rules of the Society of Maritime Arbitrators, Inc. The arbitrators shall be members of the Society of Maritime Arbitrators, Inc.

Rules

The SMA has promulgated and from time to time updates its Maritime Arbitration Rules (Rules) which provide general guidelines for arbitrators in the conduct of maritime arbitration proceedings. These Rules conform to and are subject to the U.S. Federal Arbitration Act. Consequently, parties opting to include the SMA Maritime Arbitration Rules in their contracts are assured that the arbitrators will be guided by U.S. law. In those instances where the contract provides for state law or the law of other countries to govern, SMA arbitrators will apply that law to reach their decision. In situations where SMA Rules are not a part of the controlling contract, parties may, and often do, specifically agree to have the Rules apply to the arbitral proceeding.

In cooperation with the Arbitration and ADR Committee of the Maritime Law Association of the United States, the SMA revised its Rules in 1994 [Document No. 1] to improve the efficiency of the arbitral process. Those changes to the Rules include three significant improvements: a provision for consolidation of disputes, a more efficient way of compelling an opponent to arbitrate and the award of attorneys' fees. Parties, who do not wish to consolidate disputes, may opt out of consolidation by excluding it from the arbitration clause. Since then, some changes were made to better define the scope of Section 2 (Consolidation) and to clarify the terms under which moneys are held by the SMA in escrow as security for arbitrators' fees and expenses (Appendix C).

Code of Ethics

The SMA has established standards of conduct for arbitrators in its Code of Ethics [Document No. 3]. SMA arbitrators, even when party-appointed, are required to be impartial and act without bias, partisanship or the appearance thereof. The SMA's Committee on Professional Conduct is responsible for investigating all complaints concerning the conduct of its members.

Roster

In order to assist the maritime industry in the resolution of disputes and in the selection of qualified arbitrators, the SMA publishes a roster of its members. The roster contains a brief description of the general background and expertise of each member. Members of the SMA are commercial people, recognized as leaders in their respective sectors of the industry, who have held responsible commercial positions for at least ten years. Membership in the SMA, as determined by the Membership Committee and ratified by both the Board of Governors and the general membership, is limited to individuals who combine expertise with the highest level of personal integrity. The SMA membership is drawn from the following fields: vessel management and owning, chartering management, brokerage, P&I Clubs, insurance, claims management, stevedoring, banking, surveying, engineering, shipbuilding, terminal operations, agency, etc. The roster enables disputants to identify arbitrators who have received training in the mechanics of arbitration, and can assist in the selection of panels particularly suited to decide a dispute in an area requiring specialized knowledge or expertise. The roster can be found on the SMA website (www.smany.org).

Educational Programs

Among the SMA's important functions is the ongoing education of its members and the general maritime community it serves. Throughout the year, the SMA conducts periodic workshops and seminars for its members that encourage the free exchange of ideas and experiences among and between arbitrators.

The SMA also hosts monthly luncheon seminars which are widely attended by arbitrators, attorneys and members of the maritime community. Annual seminars are equally well attended Speakers are drawn from the maritime bar, the SMA's own membership and the industry at large.

SMA members regularly participate in international conferences and assemblies, such as the biennial International Congress of Maritime Arbitrators (ICMA).

Publications

The SMA publishes The Arbitrator, a quarterly newsletter that highlights recent legal and arbitral decisions of special interest to the maritime community. The Arbitrator is made available, free of charge, to some 2,000 subscribers and other interested persons via the SMA website (www.smany.org).

Most important, however, is the SMA Award Service, which publishes the full text of the more than 4,200 arbitration awards rendered by SMA members. The Service is available through annual subscription. Subscribers include a world-wide spectrum of prominent owners, charterers, P and I Clubs, law firms, university libraries, and brokers. Awards are published in New York as a matter of course unless stipulated in advance by the parties to the contrary. New York arbitrators respect and will protect confidential and proprietary data of the principals, when requested. The arbitrators will, when asked, sign a confidentiality agreement not to disclose such details in their awards.

SMA awards are also available on both the Westlaw and LexisNexis research data banks. Such awards contain the factual background of the dispute and the reasoning used by the Panel members to reach their decisions. Thus, the awards offer significant insight as to how maritime arbitrators view various issues and certain practices and customs of the trade. The published awards, therefore, serve not only as a guide for the resolution of disputes between disputants, but also as a means for the maritime community to avoid potential disputes in future fixtures and other contracts.

New York arbitrators are not bound by legal or arbitral precedents, but where appropriate, panels do take prior legal decisions and awards into consideration. In addition to the individual awards, subscribers to the SMA Award Service also receive annual Indices identifying the vessels, parties/disputants, charter party/contract, arbitrators and the head notes pertaining to those published awards. The SMA periodically also distributes multi-year Digests summarizing and categorizing the awards published under its auspices.

Salvage

The U.S. Open Form Salvage Agreement, the MARSALV form [Document No. 4] is increasingly favored by those engaged in recreational boat and yacht salvage within U.S. waters. The form is also appropriate for the salvage of commercial vessels in U.S. coastal, river and inland waterways. In those instances where the amount in dispute exceeds $100,000, the SMA Salvage Arbitration Rules default to the main SMA Maritime Arbitration Rules [Document No. 1].